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by andrewmcwatters
1513 days ago
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I don't think you understand why multiple broad market indices exist in the first place. It has nothing to do with "performance" and everything to do with licensing fees when institutional organizations want to track against the market. No one. No one is seriously looking at the Russell 3000 and comparing it to the Wilshire 5000. To the child comment: I'm talking about two total market indices, apples to apples, and you're talking about apples to oranges. NASDAQ is a stock exchange, not an index. Further still, even if you were talking about the NASDAQ composite, they're two entirely different indices. They do not have the same goals. There might be some relative meaning there. There isn't much meaning between comparing two or more indices that have the same goals and constituents. You're only tracking the differences between constituents at that point, and you wouldn't need beta to do that. You could just calculate the difference between the constituents that are not a part of the total set. |
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People compare indices all the time to assess relative performance (e.g. Russell to NASDAQ) or HY credit to IG.
Response to edits:
> I'm talking about two total market indices, apples to apples, and you're talking about apples to oranges. NASDAQ is a stock exchange, not an index.
NASDAQ composite is one of the most commonly referenced indices. There's also NASDAQ 100, on which one of the largest ETFs in the world (QQQ) is based.
> Further still, even if you were talking about the NASDAQ composite, they're two entirely different indices. They do not have the same goals.
That's why people compare indices -- they're interested in evaluating different aspects of the market.
> There isn't much meaning between comparing two or more indices that have the same goals and constituents. You're only tracking the differences between constituents at that point, and you wouldn't need beta to do that. You could just calculate the difference between the constituents that are not a part of the total set.
Weightings? An equal weighted index will reflect increased contribution from smaller companies versus a market cap weighting (compare ETFs SPY/RSP). Same constituents, different emphasis.