Expert: Dr. Joseph de Beauchamp - 9/23/2006

Question
Do you mean: 1 point = 1 dollar? But why the point is not in billion because a share may range from 50c to 100 dollars and one company may issue millions of shares and in one stock exchange there may me hundreds perhjaps thousands of companies :) So how can the points at say, NYSE be only 10,000 and not some billions?
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Followup To

Question -
Still in confusion hehe
What makes a point and how can the points increase and decrease? Do you mean a company is a point? *sounds weird* :D
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Followup To

Question -
I always see/read about Stock Exchange reports and always notice about this thing. Lemme give an example:
NYSE: 10,000 points
Nikkei: 12,000 points
Hang Seng: 11,000 points

I think they are called composite indices/points/benchmark. But how are these points being counted? Because I still remember when there was a ficancial crisis in SE Asia back in 1997, the indices of almost all stock exchanges fell sharply from say, 1200 to 400 overnight. How could the numbers change shockingly overnight? What do these number represent?

And also what makes a value of a stock share change say, the market in Thailand falls when the coup occurs and the benchmark (points) also falls, how do these things happen and can be related?
:)

Answer -
This is correct. They are the makeup of the stocks in these markets. Sometimes you are talking the addition of 1000 companies, and then divided by a factor to arrive at an index. When they react and go down, this is because the stocks have fallen. I think we are in line for some worldwide sharp falls in the next six months, so you will see these again. They occur by the nature of the business cycle and the "wave action" of the stock markets.

You might want to divide the change by the base of the market and look more at the percentage of change. This would be more helpful to understand.

Dr. Joseph deBeauchamp

Answer -
If you had two stocks:

$100
$200


And the index was then $300


Then if the index went up 15 points, it would mean $15 or had risen to $315. Most indexes are expressed in dollars.

Answer
It is usually expressed in dollars. Most indexes have a division adjustment and average to the total price per share per company. To make more sense of this, since sometimes people learn better when reading in a library, you might go to the public library, and pull out the Valueline guide. This is over a 1000 pages of material. It is very detailed in the front on how indexes are created. The bottom line is a point is usually a percentage in concept, and the point on the index is not this concept but the adjustment up or down in dollars. I think points or percentage is much better concept since it shows the rise or fall of an index relative to the index.

10000 dow
1000 points drop

This is not a 1000% drop, but a 10% drop in value. Meaning that the average company lost 10% on this time. A stock like Microsoft for example would then drop from $30 to $27 in the overall average of the NASDQ index --but not all stocks move with the average. Microsoft would not have fallen 1000 points on this day or 1000%

Dr. Joseph deBeauchamp

Dr. Joseph deBeauchamp