Stock Share Ideal Price Calculation and Impact Cost
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Questions and Answers

What triggers index maintenance?

  • Economic indicators
  • Stock issuance
  • Market volatility
  • Corporate actions (correct)

    • Who takes the final decision on the inclusion or removal of a security from an index?

  • Stock Brokers
  • Index Committee (correct)
  • Investors' Association
  • Market Regulator

    • What is the purpose of index revision?

  • To predict stock prices
  • To reduce market volatility
  • To capture the most vibrant lot of securities in the market (correct)
  • To regulate stock issuance

    • Which of the following is NOT a major equity index in India?

    <p>NASDAQ</p> Signup and view all the answers

    Why were indices traditionally used?

    <p>To measure the overall direction of the stock market</p> Signup and view all the answers

    How are stocks chosen for inclusion in an index?

    <p>Based on pre-determined qualitative and quantitative parameters</p> Signup and view all the answers

    What is the primary responsibility of specialized agencies like Asia Index Pvt Ltd and NSE Indices Limited?

    <p>Managing index construction, maintenance, and revision</p> Signup and view all the answers

    In index management, what does revision of an index primarily involve?

    <p>Replacing existing stocks with new ones due to market changes</p> Signup and view all the answers

    How does diversification impact risk reduction in an index?

    <p>Beyond a certain point, increasing stocks in an index provides little additional risk reduction</p> Signup and view all the answers

    What is the purpose of adjusting an index for corporate actions such as bonus issues or mergers?

    <p>To maintain the accuracy of the index</p> Signup and view all the answers

    What is the trade-off involved in creating a good index?

    <p>Diversification over risk</p> Signup and view all the answers

    What is the impact of going beyond 100 stocks in an index on risk reduction, according to the text?

    <p>Risk reduction becomes negligible</p> Signup and view all the answers

    What is the main purpose of financial indices?

    <p>To represent the overall behavior of different types of financial securities</p> Signup and view all the answers

    Why is percentage change more important than the actual numeric value when discussing indices?

    <p>Because it provides a clearer picture of market movement</p> Signup and view all the answers

    How is a stock index typically used as a benchmark by portfolio managers?

    <p>To measure and evaluate their portfolio's performance</p> Signup and view all the answers

    What is one major application of stock indices in financial markets?

    <p>To serve as an indicator of overall market performance</p> Signup and view all the answers

    Why are broad indices expected to capture the overall behavior of the equity market?

    <p>Because they represent the return obtained by typical portfolios in the country</p> Signup and view all the answers

    What methodology classifies each stock in a market capitalization weighted index?

    <p>According to their market capitalization</p> Signup and view all the answers

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