Calculating Index/sector Ratios

General formula for calculating Sector-Index:


It: Sector-Index at day t

Pit: Price of stock i at day t

Pi0: Price of stock i at day (t-1)

Qit: Volume of stock i at day t

Ht: Divisor factor

I. Formula for calculating Sector-Index when there is no adjustment:

Apply the general formula

II. Formula for calculating Sector-Index in cases of adjustment:

Why do we need to adjust?

The index reflects changes in stock prices. Therefore, in the process of calculating the index, factors that change the value of the index but not due to changes in prices, such as newly listed stocks, stock splits, or mergers, are eliminated.

In these cases, the divisor factor is adjusted to ensure that the index is continuous and reflects accurately the changes in prices in the market.

The general adjustment principle: Total value before adjustment / Unadjusted divisor factor = Total value after adjustment / Adjusted divisor factor.

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