Domestic Stock Indexes
Made up of domestic stock securities and based on various components such as market capitalization.
Example: S&P500
Global Stock Indexes
Made up of both domestic and international equity securities. For a global investor, this is a nice gauge to measure relative return.
An example: S&P Global 1200 which comprises securities in 29 countries.
Bond market indexes
· Relatively more difficult to construct than equity indexes because:
· the bond universe is too broad
· the bond universe is constantly changing
· price volatility of bonds is affected by duration, which is constantly changing (volatility is due to numerous new issues, maturities, sinking features, volatility is measured by duration which subject to maturity and market yield)
· with the exception of Treasuries, bond prices are not available on a continuous basis.
Example: Lehman Brothers Aggregate Bond Index made up of 5,545 bonds across all segments of fixed income
Composite Stock-Bond Indexes
Contain both stock and bond securities.
Example: The Merrill Lynch –Wilshire U.S. Capital Markets Index
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