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Note: the columns, #shares, on day 0 and day 1 indicate the total share outstanding for each stock. Suppose we want to construct indices using
Note: the columns, #shares, on day 0 and day 1 indicate the total share outstanding for each stock.
Suppose we want to construct indices using all four stocks above, and we choose the divisor on day 0 to be 1.
- Calculate the index level for price-weighted, value-weighted, and equal-weighted indices at day 0.
- Calculate the index level for price-weighted, value-weighted, and equal-weighted indices at day 1.
- Calculate the return of each index by the end of day 1.
- After the market is close by the end of day 1, company C announces a 2.5-1 stock split, will there be any influence on each index? Explain.
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