2011 PM mock question 19
Since the change in each stock price is different than the change in market cap, it seems like stocks are being issued/repurchased. Now how is it that we calculate the value of the index based on the change in market cap.
Assume all stock prices were constant during the period. If a company issued stock, the market cap of the stock goes up, and thus so does the index. However a person who was holding all stocks in a proportion equal to their market value does not realize any gain. The index will go up due to the stock issuing even though there was no real gains in the market?