Hello,
I was unsure which forum was correct to post this in, but given that this problem comes from a comprehensive book on technical analysis hopefully this section is suitable.
As many of you are aware, there are three common methods for gauging overall market trends. These are the -- price weighted average (djia), market capitalization weighted average (s+p) and the equally weighted average. While trying to caculate the market capitalization by myself in the following example I ran into some issues in arriving at the numbers:
Market Capitalization Weighted Index:
Total market Cap:
Day1: (5*80)+(8*85)+(6*25)+(3*20)
400+680+150+60 =1290 * x = 100
--- 1290 * x = 100, x=0.0775193
Day2: (5*88)+(8*85)+(6*25)+(3*20)
440+680+150+60 =1330 * x = 103.10
Day3: (5*88)+(8*85)+(6*25)+(3*22)
440+680+150+66 =1336 * x = 103.56
Day4: (5*88)+(8*85)+(6*27.5)+(3*22)
440+680+165+66 = 1351 * x = 104.72
So my numbers are not that far from the answer, but the highlighted text must be wrong as its not 1,270,000,000 its 1,290,000,000 and the fact that these decimals are not all that close (i.e. day 3 is given as 103.46 but calculated as 103.56, day ) has me looking to see if I have went wrong anywhere. There is a formula that got cut off in my book.
I was unsure which forum was correct to post this in, but given that this problem comes from a comprehensive book on technical analysis hopefully this section is suitable.
As many of you are aware, there are three common methods for gauging overall market trends. These are the -- price weighted average (djia), market capitalization weighted average (s+p) and the equally weighted average. While trying to caculate the market capitalization by myself in the following example I ran into some issues in arriving at the numbers:
Market Capitalization Weighted Index:
Total market Cap:
Day1: (5*80)+(8*85)+(6*25)+(3*20)
400+680+150+60 =1290 * x = 100
--- 1290 * x = 100, x=0.0775193
Day2: (5*88)+(8*85)+(6*25)+(3*20)
440+680+150+60 =1330 * x = 103.10
Day3: (5*88)+(8*85)+(6*25)+(3*22)
440+680+150+66 =1336 * x = 103.56
Day4: (5*88)+(8*85)+(6*27.5)+(3*22)
440+680+165+66 = 1351 * x = 104.72
So my numbers are not that far from the answer, but the highlighted text must be wrong as its not 1,270,000,000 its 1,290,000,000 and the fact that these decimals are not all that close (i.e. day 3 is given as 103.46 but calculated as 103.56, day ) has me looking to see if I have went wrong anywhere. There is a formula that got cut off in my book.
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