Value Line Composite Index - Explained
What is a Value Line Composite Index?
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Table of ContentsWhat is a Value Line Composite Index?How Does the Value Line Composite Index Work?The Value Line Geometric Composite IndexThe Value Line Arithmetic Composite Index
What is a Value Line Composite Index?
The Value Line Composite Index refers to a stock index which contains an estimate of 1,675 companies from American Stock Exchange, NYSE, Toronto, NASDAQ, and markets that are over the counter. There are two forms of Value Line Composite Index and they include the Value Line Geometric Composite Index and the Value Line Arithmetic Composite Index. While the Value Line Geometric Composite Index is the original equally weighted index, the Value Line Arithmetic Composite Index refers to an index that mirrors changes in a case where a portfolio held equal stock amounts. Typically, these indexes are published in the Value Line Investment Survey. Arnold Bernhard created it and he's the founder and CEO of Value Line Inc.
How Does the Value Line Composite Index Work?
The "Value Line", which the index gets its namesake from, is a multiple of cash flow which Bernhard superimposed over a price chart in order to stabilize the value of various companies. Value Line is one of the most revered investment research firms. It has been having an extremely strong performance record. In fact, the model portfolios of the firm have, in general, beat the market over time. The Value Line Composite Index is made up of the exact same companies the Value Line Investment Survey, with the exclusion of closed-end funds. The fluctuation of the number of companies in the Value Line Index is dependent on factors including the delisting or addition of the companies present on the exchanges, acquisitions, mergers, bankruptcies, and Value Line's coverage decisions made for the Value Line Index. The decisions of Value Line as to the companies to add are undertaken with the aim of creating a broad representation of North America's equity market. In addition, the number of companies which are listed on any specific exchange may differ, as a company might move from an exchange to another or be delisted or added. But, delisting or moving companies on the exchanges aren't factors in the methodology of Value Line Index, regardless, whether the arithmetic or geometric calculations are employed.
The Value Line Geometric Composite Index
This refers to the original index which was introduced on the 30th of June, 1961. It is an index that is equally weighted with the use of a geometric average. The Value Line Geometric Composite Index's daily price change is gotten by multiplying the each stock's closing price ratio to its previous closing price and then raising the result to the reciprocal of the stock's total number.
The Value Line Arithmetic Composite Index
This index was founded on the 1st of February, 1988 with the use of the arithmetic mean to closely imitate the index change if you held stocks portfolio in equal amounts. The daily change in the price of the Value Line Arithmetic Composite Index is calculated when you add the daily percent change of every stock, and then divide it by the total number of stocks.