1.What is capital market? 2. Name a few major stock indices in the U.S. Describe

Question

1.What is capital market?

2. Name a few major stock indices in the U.S. Describe what they represent and what type of weights they use in estimation of the index. What are their ETF or index symbols?

3. Name major bond indices in the U.S. What are their ETFs or index symbols?

4. Name a few major sector stock indices and their ETF or index symbols.

5. Choose one stock index and one bond index. Go to yahoo/Finance and download 5 years of monthly data into your Excel for each bond and stock index. Calculate the monthly rate of return (P1-P0/P0) for bond and stock index in your Excel. Finally estimate the correlation of returns between bond return and stock return over the 5 years.

a. What does the above correlation tell you?

Explanation / Answer

1.Capital market

Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.Financial regulators, such as the UK's Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties.

Modern capital markets are almost invariably hosted on computer-based electronic trading systems; most can be accessed only by entities within the financial sector or the treasury departments of governments and corporations, but some can be accessed directly by the public.There are many thousands of such systems, most serving only small parts of the overall capital markets. Entities hosting the systems include stock exchanges, investment banks, and government departments. Physically the systems are hosted all over the world, though they tend to be concentrated in financial centres like London, New York, and Hong Kong. Capital markets are defined as markets in which money is provided for periods longer than a year

2. Market Indices

A market index tracks the performance of a specific "basket" of stocks considered to represent a particular market or sector of the U.S. stock market or the economy.

There are indices for almost every conceivable sector of the economy and stock market. Many investors are familiar with these indices through index funds and exchange-traded funds whose investment objectives are to track the performance of a particular index.

Here are general descriptions of a few major market indices. (The SEC does not regulate the content of these indices and is not endorsing those described here.) You can also find them described on their sponsors' websites and in the available information of the funds that track them.

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average is an index of 30 "blue chip" stocks of U.S. industrial companies. The Index includes a wide range of companies

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