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  1. Competency questions:

    1. What are the constituents of this index as of a given date?
    2. Are there planned changes to the constitutents of this index at some date in the future? (*** how would we define what this means?)
    3. What is the value (price) of this index on a certain date?  What are the prices for the constituents of this index as of this date and how are they weighted?
    4. What indexes are derived from this one (parents, children, dependencies)? (*** how would we know this?)
    5. What indices have a given equity as a constituent as of a given date?
    6. What constituents were added or removed from this index during a given date period? (*** how would we know this, from what sort of required notice?)
    7. What corporate actions occurred for a given constituent during a given date period? (presumably, this means that the user of the index tracks information about the individual constituent entities?  corporate actions apply to the entities typically?)
    8. What index does my portfolio most closely resemble as of a given date? (resemble in what way?) 
  2. If the user is tracking changes to an index, for rebalancing purposes, then they know from corporate actions announcements that an index may change to anticipate what might happen when the index changes.

    The index user wants to anticipate what impact any change to an index has on their portfolios before it happens.  Typically you'll get a notice at CoB that would indicate changes that will occur to an index the next day.  Idea is to try to stay ahead of what you know will happen, possibly days before it happens, with the knowledge that on the day it happens it is accurate.

    (a) corporate actions - which are important from an index perspective (splits, dividends, etc.)

    (b) once we know that's going to happen, and on what date, we have to be able to say what the impact on the index is likely to be 

    -- current and anticipated make up of an index on a given date (projected make up in order to profit or minimize a loss as a result of the change)

    -- it's more important to talk about adds and deletes than corporate actions on a given constituent

    Re 6: How do you know what will be added or removed - index provider should provide an indication to the index user; modification event announced to the users of the index in advance, with amendments *** more important than corporate actions on an individual constituent 

    Re: 4: how do you know if a given index has a dependency on another index? ???

    Re: 8: if you can match index x, then from a tracking perspective, that's a good thing, and you might track a smaller number of equities than those in the index ... so if you are closely resembling some index you can trade the index rather than the individual constituents ... requires knowledge of the index constituents as well as of your portfolios ... including weightings (more complicated than other questions)


  3. Notes from MA on how indexes change, 2/15/2019:

    • Track which securities are added/deleted to the index
    • How are various indexes weighted (price-weighted, value-weighted, unweighted, market capitalization/cap-weighted, revenue-weighted, fundamentally-weighted, float-adjusted
    • How is the index calculated (directly, indirectly)
    • Corporate actions (timing, action, effective dates, status, dummy lines) https://www.ftse.com/products/downloads/Corporate_Actions_and_Events_Guide.pdf
    • How does the index manage the treatment of index events (splits/reverse splits, dividends, capital repayments, tax withholding implications, REIT conversions, compulsory buy backs, entitlement offers, A&A, spin-offs, stock conversion, suspended companies)
    • How does the index deal with changes to shares outstanding
    • This looks useful: FTSE glossary https://www.ftse.com/products/downloads/Glossary.pdf
    • Equity index construction process: Select starting universe from eligible countries (country classification) à apply screens (security type, liquidity) à construct index universe à apply foreign ownership restrictions and adjust for free float
    • This looks useful: https://www.ftserussell.com/sites/default/files/research/how_indexes_change_final.pdf