Question 19 Mock Exam solution, change, correct, index, instead

transferpricing

Hi, shouldnt you calculate the return on the market-value index by weighting the stocks with the market cap of Jan 09 and then use the change in price instead of change in market cap?
If there is a new stock issue that leads to a higher market cap then i havent earned the market cap change - i still just earned the price change???
the solution given just takes the market cap change as performance ans thats it - looks easy, but correct?

skycfa

The market cap IS the price times the number of shares outstanding, so it accounts for price changes and changes in the number of stocks outstanding already. Tripped over that one too though...

mik82

ok, but the changes in the number of stocks outstanding is not performance for the investor! the question asked for the performance...

Chuckrox

The question stated that there were no stock splits or stock dividends over the course of the year, so in that case we can assume that the change in price is the same as the change in market value.