Revisiting Stock Market Index Methodology

36 Pages Posted: 16 Nov 2020 Last revised: 6 Oct 2023

See all articles by Mika Vaihekoski

Mika Vaihekoski

University of Turku, Turku School of Economics; University of Turku - Turku School of Economics

Date Written: September 26, 2023

Abstract

Stock market indices play a central role in portfolio and risk management, performance evaluation, and academic research. This paper provides a systematic review and discussion of the main issues in index construction, taking into account thinly traded stock markets and historical settings with a deficiency of information. The main methods to deal with missing price observations are presented and analyzed. Overall, the analysis implies that index construction methodology can have an impact on the index, its tractability as well as its statistical properties especially on thinly traded stock markets.

Keywords: index methodology, stock market index, thin trading, financial history

JEL Classification: C43, C81, N20

Suggested Citation

Vaihekoski, Mika and Vaihekoski, Mika, Revisiting Stock Market Index Methodology (September 26, 2023). Available at SSRN: https://ssrn.com/abstract=3716682 or http://dx.doi.org/10.2139/ssrn.3716682

Mika Vaihekoski (Contact Author)

University of Turku - Turku School of Economics ( email )

Turku, 20014
Finland

HOME PAGE: http://users.utu.fi/moovai/

University of Turku, Turku School of Economics ( email )

Turku School of Economics
Dep. of Accounting and Finance
University of Turku, 20014
Finland
+358 2 33351 (Phone)

HOME PAGE: http://users.utu.fi/moovai/

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