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Discussion Starter #1
The S&P/TSX is at 11,436.92 down 47.59 points from Fridays open for a loss of 0.41%.

Very basic question here, what exactly is a point? How is it calculated?

I looked it up on investopedia: http://www.investopedia.com/ask/answers/04/043004.asp but they refer to indexes using basis points, so TSX would be down 41 basis points. Basis points and "points" are different in the context right?
 

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Two different things. A basis point is 1/100 of a percentage point. So is bond yields change from 3.50 percent to 3.55 percent the yield has risen 5 basis points.

The 'point' difference in the stock indexes refers to the simple difference between the index value at the end of each day. In your example the index ended the prior day at 11,436.92 plus 47.59 = 11,484.51.

Its movement during the day equals a 4.1% change. (47.59/11484.51)
 

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Discussion Starter #3
Basis points I understand.

I don't think leslie has answered my question. What is a point, and how is the index value measured using it?
 

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It is an almost irrelevent number as it doesn't represent a dollar figure or anything. The points are based on averages of stocks. Usually most stock exchanges set a point value at a specific date and calculate the average of all the stocks represented in the exchange and changes the numbers according to the price fluctuations of each stock. For New York Stock Exchange (according to Wikipedia), the value is based on the last day of 2002, the average was set at 5000.
(These averages or point values can be reset at different days).

To have any meaning you must have reason to know where and when it was first calculated.

It is an irrelevant number used by exchanges for displaying ups or downs in the market.

It's like asking what a degree is if you don't know the scale , is it fareneit , celsius or kelvin , even if you know the scale , how can you define a degree?

212 degrees farenheit is meaningless unless you have something to compare it to , in this case it is the boiling "point" of water at sea level , now you have a comparative.

Some questions just have no right answer , for instance , if it's 0 degrees out today and tomorrow is expected to be twice as cold , just what will the temperature be tomorrow?

Don't ya just hate answers like that.
 

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Discussion Starter #6
So it basically represents the value of all of the stocks in the index relative to the base value (in points) from a previous date.

Given that, it seems to me that a 200 point or 600 point drop in an index is virtually meaningless and what's more important is the relative percentage changes we see.

Thanks for clearing it up!
 

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Given that, it seems to me that a 200 point or 600 point drop in an index is virtually meaningless and what's more important is the relative percentage changes we see.
Absolutely. The DJIA fell 508 points on Black Monday. It was a 22% drop back from its previous day close of 2246. Today, a 500 point drop would work out to only a 5% fall.

Typically, the media does mention something along the lines of "The TSX Index was up 55 points to 11,200" or something to that effect. Without the starting or ending value, the change in points is meaningless for any index.
 
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