Market Indexes Composition:
Therefore, in order to get the new divisor than formula is reframed as: Thus, the KSE is similar to other indicators that track various sector of the Pakistan economic activity such as the gross national product, consumer price index, etc. Our first stop is the
KSE 100 Index
Recomposition rules fall into two general categories: Sector rules and market capitalisation rules. Sector rules govern the selection or deletion of companies on the basis of being the top capitalisation stock in each of the 34 KSE sectors. Two rules are recommended to undertake selection in this area-one, a time based rule and the other a value-based rule.
Application can be triggered by compliance with either rule. A company not in the index which becomes the largest in its sector by any amount of value will enter the index after maintaining its position as largest in the sector for two consecutive recomposition periods i. Capitalisation rules govern the selection or deletion of companies on the basis of being among the largest capitalisation companies in the stock market.
Only one rule applies here-time based rule. A company not in the index may qualify for entry if it exceeds the market cap value of the last stock in the index selected on the basis of market cap for two recomposition periods i.
A qualifying company automatically pushes out the lowest cap selected stock in the index. The recomposition committee will meet semi-annually, with meetings scheduled to take place at least two weeks before the end of the last trading day of the month in which they occur. This is to allow for a minimum announcement period of two weeks, commencing the day following the recomposition meeting, when the results of the meeting are made public, at the end of the last trading day of the month, when changes are implemented into the index.
The recomposition committee has two broad function: The base divisor adjustment process can easily be understood by an example mentioned below. It is important to understand that all divisor adjustment are made after the close of trading.
Rule and Market Capitalization Rule. As mentioned earlier the Revised Market Capitalization are the market capitalization of those companies which would constitute the KSE Index on the next day Day 3. The Revised Market Capitalization calculated after the end of closing of trading session of Day 2 by using closing prices of the same day. The key to making this adjustment, as with any divisor adjustment, is that the index value is temporarily 'frozen' at the close of trading, while the divisor is adjusted for the increase or decrease in market value of the numerator in the formula.
Therefore, in order to get the new divisor than formula is reframed as: The formula for Re-composition of the KSE Index is same as mentioned in Table 2, except that the treatment of Base Divisor changes from Base Period Value to an arbitrary number, set such that there is no break in the index series.
This will be adjusted for any capital changes in indexed stocks. Computer Applications for Finance. Pakistan Stock Exchange Data. Paid Help in Empirical Finance-Pricing. Stata Tips and Tricks. In particular, the KSE is designed to provide investors with a sense of how the Pakistan equity market is performing. The index was launched in November with a base of 2, points. By February , it had skyrocketed to 12, points. KSE index touched the highest ever benchmark of 14, points on December 26, , a day before the assassination of former Prime Minister Benazir Bhutto , when the index nosedived.
As of April the 30th KSE Index recorded a new increase in its value standing at 28, points, that is more than By the month of June, KSE was in positive conditions and it achieved 38, points on 17 June In January , the stock market hit the all-time high of 49, points.
On 13 February, it stands at 49, points. The following is a list of the ten companies with the highest market capitalization volume and their respective weightages in the index. KSE began with a 50 shares index. As the market grew, a representative index was needed. On November 1, , the KSE was introduced and remains to this date the most generally accepted measure of the Exchange.
The KSE is a capital weighted index and consists of companies representing about 90 percent of market capitalization of the Exchange. In , the need was felt for an all share index to reconfirm the KSE and also to provide the basis of index trading in future.
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