Equity

[vsw id=”LFJYcV5EL-w” source=”youtube” width=”611″ height=”344″ autoplay=”no”] A position in an asset describes how much of the asset an investor owns. The investor can either have a long position, meaning the investor owns the asset or has borrowed money to purchase…

Leverage Ratio The relation between risk and borrowing can be measured by the leverage ratio. The maximum leverage ratio calculates financial leverage if the trader’s equity position is equal to the initial margin requirement. $$ \text{Leverage ratio} = \frac{ \text{Total…

The bid prices represent the price at which dealers are prepared to buy, while the ask prices, or offer prices, indicate the prices at which they are willing to sell. Ask prices consistently exceed bid prices. Dealers also specify the…

[vsw id=”dzzqUd0SqtQ” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Along with the technological advancements in recent decades, it has become significantly easier for investors to make international investments at low costs. Similarly, international issuers are now more capable of raising money from foreign…

Index managers must consider when the index should be rebalanced and when the security selection and weighting decisions should be re-examined. Rebalancing Rebalancing refers to adjusting the weights of the constituent securities in the index on a regularly scheduled basis…

The primary uses of market indices are to (1) gauge market sentiments, (2) serve as proxies for measuring returns and risk, (3) serve as proxies for asset classes, (4) benchmark active managers, and (5) model portfolios for index funds and…

Every index weighting method has a formula that calculates the weighting of a given constituent security within an index. For the following examples, the same portfolio of three securities will be used to help illustrate the weighting methods. Note that…

There is no perfect index weighting method as each one has its own strengths and weaknesses. Price Weighting In price-weighted indices, an equal number of shares of each security is purchased, and the beginning divisor is usually set to the…

Index providers generally take a top-down approach to constructing a portfolio by defining: the target market; the portfolio constituents within that market; the weights of individual securities; the rebalancing frequency; and when to re-examine the portfolio construction methods. Target Market…

Index Value The formula for calculating the value of a price return index is as follow: $$ V_{PRI} = \frac{ \sum_{i=1}^{N}{n_iP_i} } { D } $$ Where: VPRI = the value of the price return index ni = the number…