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Security Market Indices

What does turnover mean in relation to security market indices?

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It means replacing one security in the index with another.  It happens frequently in bond indices (bonds mature and have to be replaced), occasionally in the S&P 500, and rarely in the DJIA.

Simplify the complicated side; don't complify the simplicated side.

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S2000magician wrote:

It means replacing one security in the index with another.  It happens frequently in bond indices (bonds mature and have to be replaced), occasionally in the S&P 500, and rarely in the DJIA.

I thought that was called reconsitution?

I believe that they’re synonyms.

Simplify the complicated side; don't complify the simplicated side.

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http://financialexamhelp123.com/

My understanding is as follows:

Turnover is simply the buying and selling of securities.

You can have turnover happening for two reasons, rebalancing and reconstitution.

Rebalancing turnover is when you simply sell or buy securities to maintain target balances without changing which securities make up the index.

Reconstitution  happens when you remove existing and add new securities.

Both result in purchasing and selling of securities (turnover) but these happen for different reasons.