What is the market proxy?
market proxy is an abstract representation of the financial market movement and is usually represented in the calculations of investment by standard market indices such as the industrial average S&P 500 or Dow-Jones in the US or the Sensex index on Bombay Stock Exchange in India. The purpose of any representative is to serve as a variable in statistical calculations for part of the market, often assess the performance of individual shares against the market movement overall. Restricting any market representative is that it is an artificial representation of the whole market. As a sample of a wide range of investment options, it is designed to help determine the risk of certain assets in terms of general trends on the market. This means that each proxy can be unique because Each Investment Portfolio and the strategy itself are unique. The more investment is, the narrower the proxy must be alone. This would mean that anyone invests in an arena like commodities like gold
one of the mainCH roles played by market proxy is to reveal what is called an alpha generator. Any shares, bonds, commodity or the overall portfolio of investments that add value to the investment group without increasing risk or volatility is called the Alfa generator. These increased revenues are based on what is called the price of the price of capital assets (CAPM). The CAPM model focuses on how the risk and return level directly affects where the market proxy is a scale, that CAPM calculations must exceed for security.
Determination of whether the asset guarantees an investment using CAPM is made by comparing beta beta or the risk of asset with the expected return rate in the CAPM formula and determine whether the total trends of proxy are beat. The time factor is also entry into such calculations known as the risk -free rate of return, which represents the time for which the money must be tied in the investment before it can prove a reasonable profit. All these factors may point to excessive yields in the form of alpha,which beats market proxy forecasts, or may be insufficiently powerful trends and serve as a warning analysis for interesting investors.
However, the use of a market proxy can be misleading in calculations. This is because it can represent a very small segment of the market, such as DJIA, which consists of only 30 very large American reserves. DJIA is often quoted as a representative for the New York Stock Exchange, which has traded in more than 2,300 events since September 2011.
Effective use of market representatives can also be used in international finances. An example of this has been a financial unrest in the European Union due to debts with some Member States. Italy was portrayed in financial circles as an effective market representative for the whole European Union. This is because the Italy investment sector is very large and sophisticated and represents the bond market itself of $ 2,600,000,000,000 (USD), which equals EUR 1,900,000,000,000 since November 2011.The world's largest in the world, which is monitored only by the United States and Japan in trading and size.