STOCK EXCHANGE INDICES
The most frequently used group of market indicators is represented by stock exchange indices, which should provide an answer to the basic question: What is happening in the financial market? An index is an imaginary portfolio of securities that represents a particular market or one of its segments, e.g. a particular branch or a particular type of securities. Each index has its own calculation methodology, where each of them starts from the base observation time and the base value, which is, as a rule, indexed with 1, 10, 100 or 1,000. Changes in the value of the index are monitored, with the percentage change being far more useful than the absolute change.
When creating a stock exchange index, several important things must be taken into account. The size of the sample must be such that it can accurately represent the market segment to be approximated. Small samples can lead to inaccuracies, and large ones can produce inefficiency and complication. Another important thing that determines the quality of the index is the determination of the weight. The weighting determines the significance of individual elements of the sample on the movement of the set as a whole. The number most often taken is the number that reflects the share of the capitalization of a given share in the capitalization of the set, ie the market segment that is to be approximated.
The most popular and well-known world stock indices are certainly the American Dow Jones Industrial Average (DJIA) and the Standard & Poor’s 500 Stocks Composite Average (S & P500). The DJIA index is one of the oldest indexes since it was created in the 19th century. Created as a collection of the 30 best American companies, it is published daily in the Wall Street Journal and represents the average share price of the mentioned 30 companies. The S & P500 is an index of 500 high-quality companies, mostly based in the United States. The index is commercial, which, along with other indexes produced by Standard & Poor’s, is available to anyone who subscribes to it. This index was created in 1957, with the first S&P index created in 1923, which included 90 companies. There are hundreds of stock indices in the world,
The Belgrade Stock Exchange publishes two indices every day – Belex15 and BelexLine. Belex15 is an index of the most liquid Serbian shares traded on a continuous segment of the Belgrade Stock Exchange. This index is primarily intended to improve the investment process, through measuring the performance of the most liquid segment of the Serbian capital market, as well as through the possibility of comparing potential investment strategies according to the index. Belex15 is weighted exclusively by the free market capitalization. Free float factor is the percentage of shares that are in free circulation and that is publicly available to potential investors and is obtained when subtracted from the total number of shares are shares that are not in free circulation. Belex15 has been measured since October 4, 2005, when it had a base value of 1,000 index points,
Continuously analyzing the development and performance of shares traded on the markets of the Belgrade Stock Exchange, and in order to more accurately represent trends in the domestic capital market, the Belgrade Stock Exchange began calculating a new general market index BelexLine, which replaced the previous general index BelexFM. The main difference between these two indicators is that BelexLine represents the price movements of a representative sample of traded securities, compared to the BelexFM methodology which provided a picture of price movements of all securities that concluded at least one transaction. One of the main reasons that initiated the replacement of the existing index with a new one is the fact that the enormous growth of stock prices and market activities in general was inadequately represented by the previous general trend indicator, ie the BelexFM index. The BelexLine index is designed as a basic “benchmark” for monitoring price movements on the Serbian capital market. On the other hand, BelexLine is designed in a way that best describes the overall market trends and that can serve as a basis for creating structured products and derivatives in the domestic and foreign markets. It is expected to be an analytical tool for portfolio managers, professional analysts, the professional public, investors, as well as all others who study the dynamics of price movements on the Serbian market.