Arithmetic index

Arithmetic Index

An average in which no values count for more than others. That is, an arithmetic index simply adds the value of all data and divides by the number of data points. An arithmetic index is less common than a weighted average; that is, most indices weight for price or market capitalization. However, the Value Line composite index has an arithmetic version.

Arithmetic index.

An arithmetic index gives equal weight to the percentage price change of each stock that's included in the index.

In computing the index, the percentage changes of all the stocks are added, and the total is divided by the number of stocks. The percentage price changes of large companies aren't counted more heavily, as they are in a market-capitalization weighted index.

An arithmetic index is a more accurate measure of total stock market performance than an index that stresses relatively few high-priced or large-company stocks. However, some analysts point out that it may also produce higher total return figures than other indexing methods.

The best known arithmetic index in the United States is the one computed by Value Line, Inc., which tracks the approximately 1,700 stocks. Standard & Poor's also calculates an arithmetic version of the S&P 500 index.

References in periodicals archive ?
Both the geometric and arithmetic index multiplier (divisor) will be released at the close of trading on February 10th, 2006.
Khan (1994), also using an arithmetic index, formulation, estimated TFP growth for the crop subsector during 1980-93.
To measure total factor productivity the most frequently applied techniques in literature on agriculture are: (a) Arithmetic Index (AI); and (b) Tornqvist-Theil Index (TTI).
The estimated annual growth rates of agricultural GDP and the TFP using arithmetic index procedure based on 1960-61 and 1980-81 weights are given in Table 3.
Given the dependence of results for the arithmetic index on which weights are used, a Divisia index is considered to be the appropriate method in this case.
3) An arithmetic index, derived from a linear production function, assumes perfect substitutability between inputs.
In the past five years, they have strategically thought their way to a total return to shareholders of 53%, while the Value Line arithmetic index (a far better measure of performance than capitalization- or price-weighted indices) had a total return of 104%.
One of the oldest travel indices, developed in the 1950s for Williamsburg, Virginia, is a simple arithmetic index of hotel/motel receipts, retail sales, and tourist ticket sales.
CFRA recently published a report entitled "Biggest Concerns: Review of 2010 Performance and Themes" that details the underperformance of the companies on the Biggest Concerns list in comparison to the equal-weighted ValueLine Composite Arithmetic Index.
The S&P Commodity Arithmetic Index (SPCI-A) will track commodities across five sectors - Energy, Metals, Grains, Livestock, and Fibers & Softs.
The index, which is geometrically calculated, follows the same methodology and index construction as the newly launched Arithmetic index, but offers lower volatility.
For more information on Standard & Poor's Commodity Arithmetic Index, please visit http://www.