 # Mean

Value line and nikkei dow jow use which methode to compute holding period return? a) arithm. mean arithm mean b) geom. mean geo m. c) arithm. geom. d) geom. arithm. Really important question.

D

They are both price weighted index, So lets say… b

price weighting can’t be geometric?

cfaisok Wrote: ------------------------------------------------------- > price weighting can’t be geometric? we are talking about the HPR of the index Price weight is they way the are composed.

value line is unweighted index (equally weighted) - dont know if it is geom or arith since equally weighted can be both types?

hpr?

cfaisok Wrote: ------------------------------------------------------- > hpr? Holding period return cfaisok, calculating the index value is not related to holding period return (HPR), so I’m not sure I understand the question. HPR is index value at year end minus index value at beginning divide by index value at beginning, but that’s not something Value Line or Dow Jones do. They calculate the index value throughout the trading day, which is basically the arithmetic average of prices, nothing to do with HPR. Comments?

I don’t even know what value line is.

Nikkie and Dow Jones are both price index, so they use arithmetic averages, adjusting for denominator.

Dreary Wrote: ------------------------------------------------------- > cfaisok, calculating the index value is not > related to holding period return (HPR), so I’m not > sure I understand the question. > > HPR is index value at year end minus index value > at beginning divide by index value at beginning, > but that’s not something Value Line or Dow Jones > do. They calculate the index value throughout > the trading day, which is basically the arithmetic > average of prices, nothing to do with HPR. > Comments? Should be: value line aritmetic Nikkey dow jones Geometric Based on how the index is calculated

But if we are calculating the change in the index say year on year, we need mean computation method? While value index and price index is calcualted using arith mean, equally weighted ones can be calculated using both the approaches…

@Strangedays: Source?

value line is equally weighted

cfaisok Wrote: ------------------------------------------------------- > @Strangedays: > Source? Just thinking in math terms…but I am not sure…

It is between A&D. Equally weighted- calculated both ways- GM and AM. I don’t remember what value line uses.

saurya_s Wrote: ------------------------------------------------------- > It is between A&D. Equally weighted- calculated > both ways- GM and AM. I don’t remember what value > line uses. check value line http://www.investopedia.com/terms/v/valuelineindex.asp

just looked it up, it’s D: p 46, Reading 53. I am really happy, that i am not the only one beeing clueless Thanks for help anyway. Memorize the questition for exam…

it’s just one sentence, they want us to memorize ! Awful.