Leveraged index ETFs are often marketed as bull or bear funds. A leveraged bull ETF fund might for example attempt to achieve daily returns that are 2x or 3x more pronounced than the Dow Jones Industrial Average or the S&P 500. A leveraged inverse (bear) ETF fund on the other hand may attempt to achieve returns that are -2x or -3x the daily index return, meaning that it will gain double or triple the loss of the market. Leveraged ETFs require the use of financial engineering techniques, including the use of equity swaps, derivatives and rebalancing, and re-indexing to achieve the desired return. The most common way to construct leveraged ETFs is by trading futures contracts.
Index investingindex fundsindex
An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments. Those rules may include tracking prominent indexes like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax-management, tracking error minimization, large block trading or patient/flexible trading strategies that allows for greater tracking error, but lower market impact costs. Index funds may also have rules that screen for social and sustainable criteria. An index fund's rules of construction clearly identify the type of companies suitable for the fund.
S&P 500S&P 500 ComponentS&P500
On March 4, 1957, the index was expanded to its current 500 companies and was renamed the S&P 500. In 1962, Ultronic Systems became the compiler of the S&P indices including the S&P 500 Stock Composite Index, the 425 Stock Industrial Index, the 50 Stock Utility Index, and the 25 Stock Rail Index. The components of the S&P 500 are selected by a committee. This is similar to the Dow Jones Industrial Average, but different from others such as the Russell 1000, which are strictly rule-based.
NYSENew YorkThe New York Stock Exchange
In 1896, the Dow Jones Industrial Average (DJIA) is first published in The Wall Street Journal. In 1903, NYSE moves into new quarters at 18 Broad Street. In 1906, the DJIA exceeds 100 on January 12. In 1907, Panic of 1907. In 1909, Trading in bonds. In 1915, Basis of quoting and trading in stocks changed from % of par value to dollars. In 1920, a bomb exploded on Wall Street outside the NYSE building. Thirty killed and over 100 injured. In 1923, Poor's Publishing introduced their "Composite Index", today referred to as the S&P 500, which tracked a small number of companies on the NYSE.
Nasdaq Stock MarketNASDAQ Capital MarketNASDAQ Stock Exchange
The QQQ exchange-traded fund tracks the large-cap NASDAQ-100 index, which was introduced in 1985 alongside the NASDAQ Financial-100 Index, which tracks the largest 100 companies in terms of market capitalization. In 1992, the Nasdaq Stock Market joined with the London Stock Exchange to form the first intercontinental linkage of capital markets. In 2000, the National Association of Securities Dealers spun off the Nasdaq Stock Market to form a public company. On March 10, 2000, the NASDAQ Composite stock market index peaked at 5,132.52, but fell to 3,227 by April 17, and, in the following 30 months, fell 78% from its peak.
A recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore, the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy. Each stock exchange imposes its own listing requirements upon companies that want to be listed on that exchange. Such conditions may include minimum number of shares outstanding, minimum market capitalization, and minimum annual income. The listing requirements imposed by some stock exchanges include: Stock exchanges originated as mutual organizations, owned by its member stockbrokers.
All changes are due to market capitalisation unless stated otherwise. source: (57.9 KB) The oldest continuous index in the UK is the FT 30, also known as the Financial Times Index or the FT Ordinary Index (FTOI). It was established in 1935 and nowadays is largely obsolete due to its redundancy. It is similar to the Dow Jones Industrial Average, and companies listed are from the industrial and commercial sectors. Financial sector companies and government stocks are excluded.
Zimbabwe Industrial Index. Zimbabwe Mining Index. S&P/TSX 60. S&P/TSX Composite Index. S&P/TSX Venture Composite Index. IGBC. COLCAP. Amex indices. NYSE Arca Major Market Index. CBOE indices. CBOE DJIA BuyWrite Index (BXD). CBOE NASDAQ-100 BuyWrite Index (BXN). CBOE NASDAQ-100 Volatility Index (VXN). CBOE S&P 500 BuyWrite Index (BXM). CBOE Volatility Index (VIX). Dow Jones & Company indices. Dow Jones Industrial Average. Dow Jones Transportation Average. Dow Jones Utility Average. MarketGrader indices. Barron's 400 Index. Nasdaq indices. NASDAQ Composite. NASDAQ-100. Russell Indexes (published by Russell Investment Group). Russell 3000. Russell 1000. Russell Top 200. Russell MidCap.
Growth in the U.S. mutual fund industry remained limited until the 1950s, when confidence in the stock market returned. By 1970, there were approximately 360 funds with $48 billion in assets. The introduction of money market funds in the high interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the "Vanguard 500 Index Fund" and is one of the world's largest mutual funds. Fund industry growth continued into the 1980s and 1990s.
Across the two days, the Dow Jones Industrial Average fell 23%. By the end of the weekend of November 11, the index stood at 228, a cumulative drop of 40% from the September high. The markets rallied in succeeding months, but it was a temporary recovery that led unsuspecting investors into further losses. The Dow Jones Industrial Average lost 89% of its value before finally bottoming out in July 1932. The crash was followed by the Great Depression, the worst economic crisis of modern times, which plagued the stock market and Wall Street throughout the 1930s. The mid-1980s were a time of strong economic optimism.
Dow Jones Wilshire 5000Wilshire 5000 stock index
The list of issues included in the index is updated monthly to add new listings resulting from corporate spin-offs and initial public offerings, and to remove issues which move to the pink sheets or that have ceased trading for at least 10 consecutive days. The CRSP U.S. Total Market Index (ticker CRSPTM1) is a very similar comprehensive index of U.S. stocks supplied by the Center for Research in Security Prices. It was especially designed for use by index funds. After Dow Jones and Wilshire split up, Dow Jones made their own total stock market index, called the Dow Jones U.S. Total Stock Market Index, similar to the Wilshire 5000.
2002 Internet bubble2002-07-24crash once more
The Dow Jones Industrial Average, a price-weighted average (adjusted for splits and dividends) of 30 large companies on the New York Stock Exchange, peaked on January 14, 2000 with an intra-day high of 11,750.28 and a closing price of 11,722.98. In 2001, the DJIA was largely unchanged overall but had reached a secondary peak of 11,337.92 (11,350.05 intra-day) on May 21. The downturn may be viewed as a reversion to average stock market performance in a longer-term context. From 1987 to 1995, the Dow rose each year by about 10%, but from 1995 to 2000, the Dow rose 15% a year.
futuresfutures contractsfutures trading
Equity market - see Stock market index future and Single-stock futures. Soft commodities market. CME Group (CBOT and CME) -- Currencies, Various Interest Rate derivatives (including US Bonds); Agriculture (Corn, Soybeans, Soy Products, Wheat, Pork, Cattle, Butter, Milk); Indices (Dow Jones Industrial Average, NASDAQ Composite, S&P 500, etc.); Metals (Gold, Silver). NYMEX (CME Group) - energy and metals: crude oil, gasoline, heating oil, natural gas, coal, propane, gold, silver, platinum, copper, aluminum and palladium.
dot-com boomdot-com bustInternet bubble
In February 2000, with the Year 2000 problem no longer a worry, Alan Greenspan announced plans to aggressively raise interest rates, which led to significant stock market volatility as analysts disagreed as to whether or not technology companies would be affected by higher borrowing costs. On March 10, 2000, the NASDAQ Composite stock market index peaked at 5,048.62. On March 13, 2000, news that Japan had once again entered a recession triggered a global sell off that disproportionately affected technology stocks. On March 15, 2000, Yahoo!
List of finance topicsList of valuation topicsFinance
Dow Jones Industrial Average. Nasdaq. List of stock exchanges. List of stock market indices. List of corporations by market capitalization. Value Line Composite Index. Stock market. Stock. Common stock. Preferred stock. Treasury stock. Equity investment. Index investing. Private Equity. Financial reports and statements. Fundamental analysis. Dividend. Dividend yield. Stock split. See also: #Discounted cash flow valuation below. Dow theory. Elliott wave principle. Economic value added. Fibonacci retracement. Gordon model. Growth stock. Mergers and acquisitions. Leveraged buyout. Takeover. Corporate raid. PE ratio. Market capitalization. Income per share. Stock valuation. Technical analysis.
CNBC.comCNBC Latin AmericaCNBC-TV18
During the week of February 27, 2007, when the Dow Jones Industrial Average had its seventh-largest loss ever, CNBC's continuing coverage of events resulted in its best ratings week since the market crash after the September 11, 2001 terrorist attacks, with Kudlow & Company, Mad Money, and Fast Money recording their best ratings ever in the coveted 25-54 demographic. When the financial crisis wreaked havoc in the worldwide equity markets, CNBC recorded some of the highest ratings in the network's two-decade history. For the week ending September 19, 2008, the network averaged 502,000 viewers during the "business day" (defined by the network as 5 a.m. to 7 p.m.).
List of stock market crashesloss in history, in absolute termsstock market crashes
This is a list of stock market crashes and bear markets. * List of recessions in the United States. List of economic crises. List of recessions in the United Kingdom. Economic bubble. List of banking crises. List of largest daily changes in the Dow Jones Industrial Average.
An index may also be classified according to the method used to determine its price. In a price-weighted index such as the Dow Jones Industrial Average, the price of each component stock is the only consideration when determining the value of the index. Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively high-value name. In a fundamentally weighted index, stocks are weighted by fundamental factors like sales or book value. NASDAQ Composite. NASDAQ-100. NYSE Composite. FTSE-100. TOPIX. Hang Seng Index. DAX. RTS Index. Russell 2000. S&P 500 - Now float-weighted. S&P/ASX 200. SENSEX.
financial crisis of 2007–2008global financial crisis2008 financial crisis
The US stock market peaked in October 2007, when the Dow Jones Industrial Average index exceeded 14,000 points. It then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600. Four years later, it hit an all-time high. It is probable, but debated, that the Federal Reserve's aggressive policy of quantitative easing spurred the partial recovery in the stock market. Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression.
A price-weighted index is a stock market index where each constituent makes up a fraction of the index that is proportional to its component, the value would be: * Adjustment Factor= Index specific constant "Z"/(Number of shares of the stock*Adjusted stock market value before rebalancing) A stock trading at $100 will thus be making up 10 times more of the total index compared to a stock trading at $10. The Dow Jones Industrial Average and Nikkei 225 are examples of price-weighted stock market indexes. * Price-weighted calculation methodology via Wikinvest Fundamentally based indexes. Capitalization-weighted index.
1973–1974 stock market crash1973 stock market crash1973 worldwide financial downturn
In the 694 days between 11 January 1973 and 6 December 1974, the New York Stock Exchange's Dow Jones Industrial Average benchmark suffered the seventh-worst bear market in its history, losing over 45% of its value. 1972 had been a good year for the DJIA, with gains of 15% in the twelve months. 1973 had been expected to be even better, with Time magazine reporting just 3 days before the crash began that it was 'shaping up as a gilt-edged year'. In the two years from 1972 to 1974, the American economy slowed from 7.2% real GDP growth to −2.1% contraction, while inflation (by CPI) jumped from 3.4% in 1972 to 12.3% in 1974.
The underlying security may be a stock index or an individual firm's stock, e.g. single-stock futures. Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally delivered by cash settlement. A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative.
market capitalisationmarket capcapitalization
Different numbers are used by different indexes; there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country. List of corporations by market capitalization. List of finance topics. List of stock exchanges. London Stock Exchange. Market price. Market trend. Middle-market company. NASDAQ.
Personal investing on the other hand, has no requirements and is open to all by means of the stock market or by word of mouth requests for money. A financier "will be a specialized financial intermediary in the sense that it has experience in liquidating the type of firm it is lending to". Economist Edmund Phelps has argued that the financier plays a role in directing capital to investments that governments and social organizations are constrained from playing: "[T]he pluralism of experience that the financiers bring to bear in their decisions gives a wide range of entrepreneurial ideas a chance of insightful evaluation.
The world's largest derivatives exchanges (by number of transactions) are the Korea Exchange (which lists KOSPI Index Futures & Options), Eurex (which lists a wide range of European products such as interest rate & index products), and CME Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York Mercantile Exchange). According to BIS, the combined turnover in the world's derivatives exchanges totaled US$344 trillion during Q4 2005. By December 2007 the Bank for International Settlements reported that "derivatives traded on exchanges surged 27% to a record $681 trillion."