Tutorial 2: Chapter 2

1) The table below is based on the power point slides for Chapter 2, calculate the
Equal-Weighted Series (as in new Chapter 2 slide 33) with stock split in Stock B,
where 80 unit of share has been divided into 160 shares, and the price of share B
drop from $50 to $25. Use the capital approach, assuming you have $300
investment capital.
Sto
ck

Pric
eB

Quanti
tyB

P1

Q1

$10

40

$1
5

40

50

80

25

16
0

140

50

15
0

50

2) The table below is based on the power point slides for Chapter 2 (new Chapter 2
slide 34), compare whether changes in prices of different size of stock resulted in
different changes in index. Use the equal weighted method assuming you have $100
investment capital.
(i)
(ii)

changes in small stock A from $10 to $12 (Case 1)

changes in medium stock C from $50 to $60 (Case 2)
Initial

Case 1

Case 2

Stock

PB

QB

P1

Q1

P1

Q1

$10

40

$12

40

$10

40

100

80

100

80

100

80

50

200

50

200

60

200

3) Based on the same table as in question 2, what happen if Stock B, the biggest firm
increase 20% from $100 to $120? Is the result the same if the index is constructed
using the value weighted method?

(15 30) (25 6) (150 2.143)

100 102.38
(10 30) (50 6) (140 2.143)
Q1.

IndexE =

Solution

(12 10) (100 1) (50 2)

100 106.67
(10 10) (100 1) (50 2)
Q2.

Case 1:

(10 10) (100 1) (60 2)

100 106.67
(10 10) (100 1) (50 2)

Q3

IndexE =

IndexV =

Case 2:

(10 10) (120 1) (50 2)

100 106.67
(10 10) (100 1) (50 2)
(10 40) (120 80) (50 200)
100 108.70
(10 40) (100 80) (50 200)

The result is not same if the index is constructed using the value weighted method