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S & P 500 Stock Market Index

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If the S & P 500 Stock Market Index is 879 and declining, what does this mean?

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Solution Summary

The solution explains the implications of a decline in the S&P 500 index.

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First we have to understand how the index is constructed. In S&P 500 you would take 500 stocks chosen on the basis of liquidity, market capitalization, sectors etc. On the day that the index is made, take the number of shares outstanding of each of these 500 companies and multiply by the respective share price. This gives you the marekt capitalization of the 500 shares. Give this figure a base value say 100. Then for any other day that you want to find the ...

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