**CFA Level 1 - Securities Markets**

The methods of calculating the various weighting schemes is best explained by example:

Example: Price Weighted Series

Given the following series data, calculate the price weighted return over a one-year period.

Stock Price Info for Series 1

Answer:

To calculate the return over a one-year period, first calculate the price weighted series value at each date.

Price weighted index_{12/31/2003}= (15 + 25 + 40 + 80)/4 = 40

Price weighted index_{12/31/2004}= (10 + 30 + 40 + 100)/4 =45

The one-year return for the price weighted series would thus be (45/40)-1 = 12.5%

Example: Market Weighted Series

Given the following series data, calculate the market weighted return over the one-year period.

**Stock Price Info for Series 2**

Answer:

Market weighted return = (390,000/355,000)* 100= 109.59

The 1-year return for the market weighted series would thus be (109.59/100)-1 = 9.90%.

Example: Unweighted Series

Given the following series data, calculate the unweighted return over a one-year period.

**Stock Price Info for Series 3**

Answer:

Geometric Average = (1.05 * 1.25 * 1.00 * 1.30)^{1/4}= 1.143

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