Highlight the main problems encountered in the construction and use of a stock

      

Highlight the main problems encountered in the construction and use of a stock market
index.

  

Answers


Martin
Problems in preparing the index

- Treatment of bonus issue and stock split.

- Selection of shares to include in the index.

- Incorporation of newly quoted firms.

- Determine the base year

- Different methods of computing index e.g. value and price weighted, arithmetic
and geometric mean etc.

- Frequency of stating the changes in the index.
marto answered the question on February 12, 2019 at 08:11


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