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Indices and industries

A

andy orodo

Member
Can anyone give me an indication of how this topic is examined? There seems to be a lot of information to rote learn but I was wondering what depth of knowledge is really required?

Will you be asked to comment on re appropriateness of it's use for a particular purpose? Anyone have any suggestions for how I go about learning this topic? Would it be sufficient to know what features are desirable for different purposes or will the examine just spring on you something like "comment of the use of the CAC as a benchmark?" for a particular portfolio?
 
HI

Historically the industry material has been examined in bookwork questions. Eg:

Subject ST5, September 2005, Question 8
(i) Explain why equities are usually analysed in sector or industry groupings.
(ii) (a) Discuss the advantages and disadvantages of this sub-division.
(b) Suggest, with reasons, two possible alternative groupings.

Subject ST5, September 2006, Question 7 (part)
You are an investment manager specialising in equities. You want to set up a fund that will track the FTSE All-Share index. The fund will match the index weight in each industry sector, but will not necessarily include every index stock to achieve the sector weight.
(i) List the ten economic groups in the FTSE Industry Classification and briefly explain their key characteristics.

The indices material is also examined as pure bookwork, but there have been more applied questions, eg, on the suitability of a particular index:

Subject ST5, April 2008, Question 4
(i) Describe the two principal global equity index series.
(ii) List five ways in which a large institutional investor can achieve the returns (gross of costs and tax) of a global equity index.
(iii) Explain why this type of index would be more useful for performance measurement for an overseas investor than the most widely quoted local equity index.
(iv) Explain why this type of index would be less suitable than the most widely quoted local equity index as a base for exchange-traded derivative contracts.

Using ActEd's ASET or the Revision Notes will help you see how these topics have been examined.
 
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