Sector Specific Indexes

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DECLARATION

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Table of Contents

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 2: LITERATURE REVIEW1

Sector Specific Index in Stock Markets1

Working of stock market index2

Construction of sector specific indexes2

Uses of sector specific indexes3

Market Capitalization Rule for Index Computation4

REFERENCES6

CHAPTER 2: LITERATURE REVIEW

These indexes follow the logic that if the investors buy stocks of a particular index, he will be exposed to that specific sector without needing to purchase the stocks of every single particular company operating in the same sector in the whole world. This is because the shares of a particular company and industry of the index represents the overall performance of the particular company shares in the whole world (Burton, 2006, Pp.154).

There have been performed various studies in the past that provide a thorough analysis of the stock market indexes. The sector specific index has also been analyzed in various studies. The research study analyzes the stock market indexes in various perspectives and takes into account several aspects of it. It includes the sector specific indexes in the stock markets, working of stock market index, construction of the sector specific index, their uses and the market capitalization rule for the computation of the index.

Sector Specific Index in Stock Markets

The sector specific stock market indexes are those indexes that represent the stocks of a certain industry. It provides information about the performance of several companies that are grouped under a particular industry or the sector of the industry. Through the sector specific index, the investors can buy or sell all the stocks of a particular industry in one transaction as the sector specific indexes represent the stocks of a particular industry (John, 2002, Pp. 87).

There are many examples of the sector specific indexes. For example the Dow Jones U.S Internet Index has been constructed in order to follow the companies that are engaged in providing the Internet services in the United States. These sector specific indexes represent the companies of a particular sector of the economy (Mark & Hebner, 2007, Pp. 23).

Working of stock market index

The stock market index works in a very different manner. They are usually constructed in order to analyze the movements in a specific asset or the market. The sector specific index includes only those companies for which the index has been constructed. For example the Precious Metals and Gold Index (XAU) includes only those companies that supply the precious metals and gold products in the market (Taylor & Mel, 2006, Pp.123).

Construction of sector specific indexes

There are present different sector specific indexes in the market that ...