Stock Market Index – Basket of Shares

The term “basket of shares” refers to a specific group of shares.

One example of a basket of shares is the Dow Jones Industrial Index, which includes the shares of 30 industrial companies ranking among the largest industrial companies in the United States. Dow and Jones are the names of the people who drew up this basket.The Standard & Poor’s 500 (S&P 500) is an index that includes shares from the 500 largest publicly-traded companies in the United States. Standard & Poor’s is a financial service company that publishes many stock market indices including the S&P 500.

Calculating the Price of a Basket of Shares

The price of a basket at any given time is determined by the values of all the shares included in it.

For example, we will use the Dow Jones components table to monitor the changes in price of the Dow Jones basket of shares on August 15, 2008.

Explanation of Table 4.1

Column 1 lists some of the 30 companies whose shares are included in the Dow Jones.

Column 2 indicates the number of shared offered.

Column 3 is the share price on August 17, 2008 (The price refers to the share price in Dollars)

Column 4 is the market value of the companies. For example, the market value of 3M Co. (the first row) amounts to 73.16$ billion (rounded off).

Column 5 – Every row in the column represents its relative share (weight) of the value of the basket, or, in other words, the percentage that each contributes of the basket.

Column 6 – The Stock symbol.

Table 4.1 -Some of the Dow Jones Components (date are rounded off)