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Strategies & Market Trends : Asia Forum

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To: peter michaelson who wrote (5879)	8/26/1998 12:47:00 AM
From: eWhartHog	Read Replies (2) of 9980

Peter, The index you displayed is the Value Line Geometric Index (VLIC). Contrast this with the Value Line Arithmetic Index (VAY) and you see the bull market. quote.yahoo.com^VLIC+^VAY&d=my I can't recall if either is weighted by market cap, and geometric indexes don't make much sense as market indicators. I haven't looked into this for 20 years, but as an example: Suppose you have an index of 2 $10 stocks, A and B, with equal numbers of outstanding shares: 1. In a geometric index, if A falls to $5, B must rise to $20 for the index to be unchanged. The price of A times the price of B is unchanged. 2. In an index such as the S&P 500 or NASDAQ 100 (which I think are arithmetic indexes) if A falls to $5, B need only rise to $15 for the index to be unchanged. The average of the prices is unchanged. Value Line Arithmetic Index futures are traded on the Kansas City Board of Trade. I'd appreciate corrections from anyone with more current knowledge. John

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