CONCEPT OF THE INDICES
An index can be defined as a statistical instrument that represents in abbreviated and simple form, in a single average number, multiple variations of a given phenomenon of homogeneous characteristics during a given period. In the specific case of the stock market, a stock price index is an average indicator that reflects in a number, the aggregate variations in the prices of a group of shares. Such an indicator is the most representative element for the analysis of the stock market, being the most agile and simple instrument to reflect the evolution and trend of stock prices.
When analyzing variations in the level of shares, it should be taken into account:
- Influences conditioned by the market: fluctuations produced by the exclusive action of the supply and demand of the market.Influences outside the market: This is the case of changes in the price level for new issues, payment of dividends in shares, reduction or expansion of the nominal value of the shares, among others.
A fundamental aspect to take into account in structuring the index is the shareholder composition; the most used trends in this regard are:
- Total portfolio: includes all the shares registered in the stock market. Partial portfolio: includes a specific sample of stock on the stock market.
Another aspect to consider is the weighting of the shares within a portfolio, since the stock market is not always actually made up of homogeneous-level stocks, but rather of innumerable different behaviors, which is reflected in the great heterogeneity existing in the quotation of the different shares. Currently, the indices are calculated bearing in mind some form of weighting. These can be very diverse, the most widely used being those related to: share capital or market capitalization, volume traded, temporary average of transactions; presence and / or level of activity.
The indices present subdivisions in the form of previously determined groups and subgroups, this in order to better observe the behavior of a set of actions. The most used subdivision is that of specific sectors of activity. The tendency is to seek greater specialization in the structuring, presentation and use of indices, although when there are very limited subdivisions, it can be found that the index of a subgroup is practically that of an action.
Once the general structure of the index has been defined, its construction can be done in a sequential or dependent way (relating the global index, the different subdivisions and the base action index), or without any consideration on whether the obtained subscripts can be added in the weighting. global.
One of the simplest but fundamental aspects in the construction of the index is the choice of the initial reference date, in more technical terms, the base of the index. Its importance lies in the fact that the evolution of price variations is determined against this basis. With reference to the base, there are two alternatives: a specific date or day and a base period.
In Colombia, the best-known stock price indices are the following: the Banco de la República index, the Bogotá Stock Exchange index (IBB), the Vallejo index, the Medellín Stock Exchange index (IBOMED), and the the western stock market (IBO).
Bogotá Stock Exchange Index (IBB)
It is a chained daily price index, presented in aggregate, for three sectors and thirteen subsectors of economic activity, being considered the best known stock price index in the country. It groups all the companies listed on the Stock Exchange and is based on March 15, 1976. The source of the information is given by the prices and daily quantities of the papers traded on the Stock Exchange, and accumulates the data quarterly to carry out the respective weighting.
The structure of the index is given by the factor of variation of the index from one day to the next using the following formula:
Stock Market Calculation Formula
P (t) = Last share price (i) on day (t)
P (t-1) = Last share price (i) on day (t-1)
W (n) = Weighting of the share (i) in the last previous quarter (n)
W = T * k; where (T = number of traded shares) and (k = price weighting element).
I ' (t) = Daily factor on day (t)
With this kind of weighting, daily indices react only to variations in price and not to variations in the quantity traded. Variations in quantity are made each month when the quarterly weight is being revised. This revision is understood to be part of the quarterly weight the amount traded in the last month that has just passed and the amount of the first month of the quarter in use is discarded.
Stock Quote Index of the Bolsa de Medellín SA (IBOMED)
The IBOMED is a chained, weighted and corrected daily index of shares listed, which reflects the variation in the price of the shares listed on the Medellín Stock Exchange, both generally and by specific sectors.
It has two basic forms of presentation: the general IBOMED made up of the shares of all the registered companies and the selective IBOMED made up of the shares of the registered companies that fulfilled the requirement of having more than 300 shareholders, which was fulfilled by 33 companies, so the index is called selective 33/300.
The mathematical formulation of the IBOMED is:
Stock Market Calculation Formula
P (t) = Last share price (i) on day (t)
P (t-1) = Last share price (i) on day (t-1)
Q (t) = Weighting of the action (i) on day (t)
Q (t-1) = Weighting of the action (i) on the day (t-1)
I ' (t-1, t) = Factor of change in the index between day (t) and (t-1)
The IBOMED is calculated daily based on the latest prices negotiated and published in the newsletter of the day of the Medellín Stock Exchange.
BIBLIOGRAPHY
- SECURITIES SUPERINTENDENCY. Corporations, Stock Valuation. 1990.ARANGO LOPEZ, José E. IBOMED - Stock price index of the Medellín Stock Exchange. nineteen ninety six.
