Composition Stock Price Index-based Model Of The Empirical Analysis

Stock price index is of great important indicator to reflect the volatility of the stock price in the security market. Investors?attitude towards the stock indices varies widely and they often use different indices to meet their investment demands. Therefore, diversified series of indices with different functions coexist in the security market of developed country. A perfect stock index system can provide evaluation tools of investment for index funds, various derivatives for financial investors, measures for risk aversions to reduce their position risk as well as dynamic information for security market analyst.SSSPresently, most published indices belong to small size index with the characters of low liquidity, inappropriate industry coverage and weight, high cross-ownership. Some research papers show that indices with large size are more sensitive to the turning points of economic then that with small size. Index funds and investors of stock index future prefer using the former index as trade object.On the assumption of the unification of two stock markets, we apply several commonly used statistical methods, such as factor analysis, clustering analysis, correlation analysis, to build an effective model by which an objective stock sample can be obtained for computing index. Meanwhile, the information derived from the accounting annals of public owned company and the idiosyncrasy revealed by fluctuant pattern of stock price have been fully exploited. The index computed by this model covers all kinds of industries and regions and it can also be used in the further developed security market.The main purpose of this dissertation is to bring forward an objective and comprehensive model by which we can calculate a large size index that can offer more convenience and low tracing cost for risk management.The dissertation is divided into four chapters.Chapter 1 provides a general introduction to the methodology and subject of indices and a brief treatment of basic concepts of index. It also contains the research scheme and empirical analysis plan.Chapter 2 presents general views on the difference between using total number of shares and liquid number of shares as the weight of index. An empirical study is also conducted to show the real difference. Finally, the algorithm of index calculation and base date adjustment is given.Chapter 3 deals with the illustration of stock selection model and the principles of adjustment, specifically the 5362 stock index selection model.Chapter 4 demonstrates the outstanding characteristic of S362 index from four aspects: a representative aggregation of stocks in security market, high correlation with main stock indices, high investment return and low systematic risk, same BETA value distribution as stock market.