Learning Module 2 Security Market Indexes

What is the primary difference between a price-return index and a total-return index?

How is a price-return index value (VPRI) commonly calculated at a point in time?

If an index provider wants its price-weighted index to remain unchanged when a 2-for-1 stock split occurs in one constituent, what must the provider adjust?

Which weighting method tends to overweight securities that have appreciated recently, producing a momentum-like effect?

An equal-weighted index is rebalanced to target equal weights. Which of the following is a primary consequence of rebalancing?

Which statement best describes float-adjusted market-cap weighting?

Which weighting method is most likely to produce a value tilt in the index?

Which of the following is a primary purpose of reconstitution in index management?

Which index pricing rule do many continuous order-driven markets use to determine trade prices when an arriving order matches standing orders?

What is the principal advantage of a call market compared with a continuous trading market?

Which index pricing method do crossing networks often use when matching buy and sell orders?

Which of the following is a reason an investor would choose a market-cap-weighted index as a benchmark?

An index provider weights countries in a global multi-market index proportionally to GDP rather than to market capitalization. This weighting approach is an example of:

Why might an index provider choose to float-adjust market capitalization rather than use total shares outstanding?

Which pricing rule is commonly used to price trades in a call market auction?

Which of these is the most direct benefit of high transparency in a market?

Which of the following best explains why commodity index returns can differ significantly from spot commodity price changes?

Why are fixed-income indexes often harder for investors to replicate exactly than equity indexes?

Which index type is most appropriate as a benchmark for a global small-cap equity manager?

Which of the following is a common effect of index reconstitution announcements for a widely used index such as the Russell 2000?

An index provider sets the index initial value to 1000. If the index posts two consecutive annual price returns of 5% and 3%, what is the index value at the end of year two?

Which of the following best describes a broad market equity index?

Which index family would an investor use to benchmark a portfolio of European real estate securities?

Which characteristic is most likely to make a stock difficult to include in an index designed for easy replication by investors?

If an index provider wants to minimize turnover from price movements, which weighting method is likely best?

Which of the following best describes 'float' when used in float-adjusted market-cap weighting?

Which of these is NOT a typical index use described in the chapter?

An investor wants an index that minimizes exposure to stocks whose shares are not tradable by foreign investors. Which weighting adjustment should they look for?

Which of the following is true about indices constructed for ETFs?

An index is constructed from the top 3,000 US stocks by market capitalization and aims to represent about 98% of the US equity market. Which index is this most similar to?

Which of these is a practical disadvantage of equal-weighted indexes relative to market-cap weighted indexes?

Which of the following index features is most important for an investor who needs low transaction costs when tracking an index?

What does it mean for an index to be 'transparent' in pre-trade terms?

Which of the following is most likely a reason an index provider would use selection committee judgment rather than mechanical rules when choosing constituents?

An index uses a composite of book value, cash flow, and dividends to weight constituents. This is most consistent with which indexing approach?

What is the main operational advantage of building an ETF on top of an existing well-known index?

Which statement about depository receipts (DRs) is correct?

Which of the following index characteristics tends to increase investors’ ability to track the index at low cost?

Which of the following best captures why market-cap weighting is often used for broad-market indexes?

Suppose an index uses price-weighting. Which corporate action will require a divisor adjustment to keep the index value continuous?

A cross-border investor seeking to eliminate foreign exchange exposure while tracking a foreign equity index could use which of the following products?

Which of the following best explains why hedge-fund indexes may overstate industry returns?

Which of the following index types would most likely include mortgages, asset-backed securities, and corporate bonds together?

A crossing network that executes trades at midpoint prices of the primary exchange best exemplifies which trade pricing rule?

Why might an index provider choose to have a fixed number of constituents in an index (e.g., '100' in an index name)?

In the context of index construction, what is 'rebalancing'?

Which of the following best describes the 'roll yield' mentioned in the chapter in relation to commodity indexes?

Why might a fund manager prefer a float-adjusted market-cap index over a full market-cap index when constructing a global passive fund?

Which of the following index design choices most directly affects how index income (dividends, interest) is reflected in the index return series?

Which of the following best captures a disadvantage of price-weighted indexes compared with market-cap-weighted indexes?