8 votes
Accepted

What does a stock market index stand for?

Indexes don't have units. They're indexes. An index is a ratio of two numbers. The two numbers have the same dimension. So their ratio is unit-less. The compilers of each stock market index set a ...
410 gone's user avatar
  • 8,158
5 votes
Accepted

About the 9 tests on Index number theory to evaluate the efficency of the different types of price indexes

Are this test used nowadays? Is there a more recent paper about it? As far as I know, (theoretical) index number theory is not so popular anymore nowadays. The feeling is probably that we know most ...
tdm's user avatar
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4 votes
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Why do we need to divide by the CPI of year of reference when calculating inflation rate?

Because inflation is defined as a positive growth rate of CPI. By definition growth rate is: $$g=\frac{x_t-x_{t-1}}{x_{t-1}} \tag{*}$$ That is just how growth rate is defined in sciences anywhere from ...
1muflon1's user avatar
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3 votes
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Difference between chained CPI and normal CPI in simple terms

The consumer price index is used to measure the rate at which prices increase. It is calculated by taking a basked of common goods that people buy all the time (groceries, appliances, etc.) and ...
Ubiquitous's user avatar
  • 16.9k
3 votes

What does a stock market index stand for?

While stock indexes can be formally defined as unitless, they are tied to a currency because comparing market values at different times requires a specific, persistent unit of account. A simple ...
nanoman's user avatar
  • 539
2 votes

Why are Big Macs supposed to cost the same around the world?

Because of the Law of One Price, identical products are supposed to cost the same in different places. Since McDonald's applies standards for all the individual franchisees, the product is supposed to ...
H2ONaCl's user avatar
  • 943
2 votes

Should Prices (or Price Indices) be modelled with deterministic trend?

Should Prices (or Price Indices) be modelled with deterministic trend? Often yes. Prices could have time trend for various reasons. For example, the most obvious one is inflation. While inflation is ...
1muflon1's user avatar
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1 vote
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KPIs re-indexing after some years

This is so-called base shift. It was typically done every 5-10 years by various statistical offices, although now some do it on yearly basis. The reason why this is done is that CPI does not actually ...
1muflon1's user avatar
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1 vote

What would be the issue if we approach inflation analysis without considering consumption bundles?

What kind of analysis would we be unable to do if we constructed a price index that is just the ratio of the sum of new prices to the sum of old prices? You would probably be unable to do meaningful ...
Giskard's user avatar
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1 vote
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Should I care about the actual CPI value or just the rate of change?

I'll answer questions 1,2,3 and 4. (1) How may I associate CPI to vehicle cost/price in dollars (USD) for a given year? From the Federal Reserve Economic Data, we see that the base year is 1982-1985, ...
Alexandre Michaud's user avatar
1 vote
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How does "Buffet Indicator" work when market cap(nominator) is daily & GDP(denominator) is quarterly?

It is generally true that indicators constructed that way (higher frequency on top) can and do jump when GDP (or another lower frequency denominator) is released. This can be an issue in some use ...
BrsG's user avatar
  • 1,632
1 vote

Why would an investor choose to invest in one index fund as opposed to another?

There's a lot to unpack here. It is increasingly the case, especially among passive strategies, that transaction costs and management fees are the primary dimension along which funds are ...
heh's user avatar
  • 1,808
1 vote

Manipulating index numbers

The best way is taking the index "ingredients" and rebuild it... assuming you manage the index data on a DB or on an excel file, that should not be too difficult Otherwise, assuming you're index ...
Guy Louzon's user avatar
1 vote

How can I adjust the base year of this price index?

No, you want to re-scale proportionally, so you want to solve the equation $115.9x=100$, so that $x=100/115.9$ and then multiply each value by $x$. The value for 1997, for example, should be 86.3 (...
Regio's user avatar
  • 4,188
1 vote
Accepted

What does the sun product of price times quantity divided by average price

Note that $Q_i P_i$ is the total revenue from good $i$. So dividing total revenue from all goods by the amount produced of all of them should give us something like "average revenue per item produced"?...
Pedro Cavalcante's user avatar
1 vote
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Daily variable for inflation

The Billion Price Project offers what you want: Daily price indices, monthly, and annual inflation rates for Argentina and the US. Monthly data with annual inflation rates for Argentina, Brazil,...
BKay's user avatar
  • 16.3k
1 vote

Interpretation of price indices

In itself, a price index for single period does not tell you much, as any index is, by definition, without dimension. Assuming that 3.41 is the annual change in the CPI (= Consumer Price Index), this ...
E. Sommer's user avatar
  • 1,307
1 vote

How to calculate price index for natural gas in India?

Since 2014, this is the official formula to compute the price of NG in India: The details of this formula, including where the data is taken from can be found here. To see historical data with this ...
luchonacho's user avatar
  • 8,591
1 vote

Log relative price index - calculation question

I think you should calculate the log of the ratio of two price series. When googling "log of relative price index", I did not find many references, but I found three which seem sufficient to me: ...
luchonacho's user avatar
  • 8,591
1 vote

How to calculate constant GDP in international $ from nominal GDP in local currency units

You need to use PPP rates. These convert basket of goods in one country (in LCU) to that of (normally) the US, in US dollars. You can find these rates here or here. With these rates you can transform ...
luchonacho's user avatar
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