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Technology Stocks : Nortel Networks (NT)
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To: bambs who wrote (7574)10/25/2000 11:53:37 AM
From: jack bittner  Read Replies (1) of 14638
 
i wouldn't grace this one with the word "thought". it's just an unknowledgeable youngster trying out words in the hope that he'll hit on something.
when the makers of an index decide to put a stock on their index - to make up, say, 1% of that index - then all index funds must buy enough of that stock to equal 1% of their funds. those purchases drive the stock up. the stock that goes OFF the index because it was replaced IS sold, and it falls.
once on the index, and consequently in the index funds, the change in the price of the stock will - of course - automatically reflect that that stock is worth less. the funds neither have to buy more stock if the price goes up, nor sell stock if it goes down.
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