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There are many ways to calculate an index and the following is what I
do. Just as the DJ30, choose a variable divider to ensure the
continuity of the index. index = sum(all stock prices)/divider.
At the beginnig, the index is 100. Suppose there are 3 stocks: A, B,
C.
The initial divider d = (A+B+C)/100; index = (A+B+C)/d = 100.
The divider doesn't change until there is a split or a new addition.
When there is a split, for example, stock A has a 2 for 1 split, and
its new price is half of its old price, but the index should not
change. So (A+B+C)/d = (A/2+B+C)/d1 where d1 is the new dividor. Thus
we get d1 = (A/2+B+C)*d/(A+B+C).
When adding a new stock D, the divider is adjusted (on that day) as
follows:
d1 = (A+B+C+D)*d/(A+B+C) where d1 is the new divider.
--- In amibroker@xxxxxxxxxxxxxxx, "Graham" <gkavanagh@xxxx> wrote:
> I am trying to create an index of my watchlist of stocks that is
consistent.
> It is easy to do if they all have traded for the same period of
time, but
> some stocks started trading more recently than others. The standard
method
> of just adding the prices means that if a stock starts the resultant
> composite chart gaps at that day due to the extra price of the new
stock. I
> tried dividing by the number of stocks but the gap remains.
> I have also tried just using the change of price each day but it
does not
> produce a usable chart.
> Has anyone got any ideas that I could try.
> Ultimately I want to use it as a tool to determine strengths and
divergances
> within the watchlist of stocks, much as a sector index would be
used.
> TIA
>
>
> Cheers,
> Graham
>
> <http://groups.msn.com/ASXShareTrading>
> http://groups.msn.com/ASXShareTrading
>
> <http://groups.msn.com/FMSAustralia>
http://groups.msn.com/FMSAustralia
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