Share indexation : a comparative analysis of the composition and performance of selected indices, 1990-2000

Abstract

The dissertation discussed the concept of share indexation. It considered three main stock market indices, namely, the Dow Jones Industrial Average (DTIA), the Financial Times Stock Exchange 100 Index (FTSE 100), and the Nikkei 225 Stock Average (Nikkei' 225). It reviewed the available literature of the aforesaid stock indices with the stock exchanges' from which the stocks of the respective indices arc derived. Also we attempted to review the economic/financial events and highlights that characterized the performance of the economies in which the said stock indices are calculated. Through our methodology we calculated which index performed better throughout each year. Besides this, we have attempted to determine if there was any correlation between the indices themselves and the index with its respective economy. Finally, we have attempted to determine how representative these indices are of economic and financial performance. On a smaller scale, the same process was done for the local scenario, using the Malta Stock Exchange Index. The use of a semi structured questionnaire has helped to get the feel of what the local financial services institutions think about the selected indices and of the local Malta Stock Exchange Index. Overall, the American index outperformed the other two selected indices Also, it transpired that the foreign share indices are a very good indicator of their respective economic cycles. Contrary to this, the Malta Stock Exchange Index doesn't seem to offer such a strong indication.