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A stock index is a statistical method of measuring the value of a section of the stock
market or to find out the performance of underlying stocks. It is the statistical indicator
which shows trends in investing patterns and used in the measurement and reporting of
changes in the market value of a group of stocks or shares from an original value. As the
stock index changes, it means that the value of stocks is changing.
It is a tool used by investors and financial managers to describe the market, and to
compare the return on specific investments.
Calculation of stock index: There are two ways to calculate stock indices. They are:
Price weighted index such as the Dow Jones industrial average
Market cap weighted index such as the NASDAQ, Standard and Poors 500 etc.
The market is differently tracked by different stocks indices it depends upon three factors.
Those are:
(1) The averaging method which is used to establish the index
(2) The index broad based
(3) Whether the assigning of the weight of averaging method is based on market price or
market capitalization.
Forex:
In simple words, exchange rate means how much one currency is worth in terms of
another currency. If we can buy $ 1 with BDT 80, the exchange rate of the two
currencies would be $1 = BDT 80
.
There are two types of exchange rate: Fixed and Floating.
The fixed exchange rate doesnt fluctuate because of government intervention. The
floating exchange rates on the other hand keeps on changing continuously just like the
stock market. Government intervention is almost negligible.
So, which type of exchange rate system does Bangladesh have? In Bangladesh, we have a
Managed Floating Exchange Rate System.
Let see the two very commonly used terminologies which causes fluctuation in currency.
Currency Appreciation &
Currency Depreciation
When BDT is said to be appreciating it means that our currency is gaining strength and
its value is increasing with respect to dollar. Suppose, currently, the exchange rate is BDT
80 = $1. If the exchange rate is say BDT 72 = $1. This means rupee has appreciated or
gotten stronger by approx 10%.
When BDT depreciates it means our currency is getting weaker & its value is falling with
respect to dollar. The exchange rate is at BDT 88 = $1. This means rupee has depreciated
or gotten weaker by approx 10%.