Does the total stock market index have an alternative?

According to Tejarat News, on July 22, at the beginning of his weekly press conference, Ali Bahadri Jahormi spoke about the capital market and believed that the total index of the stock market has grown by 10% since the beginning of the 13th government, which means that the stock market is stable.

Therefore, Majid Eshghi, the head of the stock exchange organization, announced that a new index will replace the total index and the market will improve when the index was down and in a bad situation.

Some capital market activists welcomed this issue and others objected to this issue. Proponents believe that a new index can show the real trend of the capital market. Opponents also say that there is no problem with the capital market process and that the creation of a new index will disrupt the trading process.

Is the total stock market index manipulated?

Mohammad Razavi, a capital market expert, said: The non-adjustment of the total stock market index with the market situation has always been objected to by the people of the capital market. Index is the translation of the English word index. In a general sense, it represents a number that you can see changes in a variable in a period of time.

He continued: The total index of the stock market is a number that indicates the general situation of the stock market. In a more precise definition, it expresses the general level of price and profit of companies admitted to the stock exchange, which is one of the most important defects attributed to the total index according to experts. This inclusion is based on the cash profit of the past years and makes the index inconsistent with the current price changes.

This capital market expert explained: Another fundamental problem is the issue of the size and smallness of the companies’ market. So, the larger the company, the greater its impact on the overall index. Indexation can be done easily by price manipulation or block trades in large market symbols (so-called index makers).

Razavi emphasized: Using an index in the current conditions cannot be a good criterion for monitoring the market trend. As a result, using equal weight index, price index and industry index instead of the total index can give analysts a more accurate view of market conditions.