Page 28 - FINAL CFA I SLIDES JUNE 2019 DAY 12

Session Unit 13:
45. Security Market Indexes

LOS 45.g: Describe uses of security market indexes., p.226

• Reflection of market sentiment or investor confidence

• Benchmark of manager performance.
• Measure of market return and risk , or measurement of beta and risk-adjusted return.

• Model portfolio for index funds –for passive investment to replicate the performance

of the market index.
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LOS 45.h: Describe types of equity indexes., p.226

• Broad market index e.g. JSE All Share Index
• Multi-market index –based on indexes of markets in several countries in a region e.g.,

Latin America indexes, e.g., emerging markets indexes, or the entire world e.g., MSCI
World Index).
• Multi-market index with fundamental weighting -uses market capitalization-weighting for

the country indexes but then weights the country index returns in the global index by a

fundamental factor (e.g., GDP).
• Sector index -measures returns for an industry sector e.g. mining or banking index.
• Style index -measures the returns to market cap and value or growth strategies, e.g.,

small-cap value fund.