Discussing stock and stock index movement: clarifying percentage vs. points?
As I write this, the NASDAQ Composite is at 2790.00, down 6.14 points from yesterday. To calculate the percentage, you take 6.14 and divide by yesterday's close of 2796.14 to yield 0.22%. In your example, if SPY drops from 133.68 to 133.32, you use the difference of -0.36 and divide by the original, i.e. -0.36/133.68 = -0.27%. SPY is an ETF which you can invest in that tracks the S&P 500 index. Ideally, the index would have dropped the same percentage as SPY, but the points would be different (~10x higher). To answer your question about how one qualifies a point, it completely depends on the index being discussed. For example, the S&P 500 is a market-capitalization weighted index of the common stock of 500 large-cap US public companies. It is as if you owned every share of each of the 500 companies, then divide by some large constant to create a number that's easily understood mentally (i.e. 1330). The NASDAQ Composite used the same methodology but includes practically all stocks listed on the NASDAQ. Meanwhile, the Dow Jones Industrial Average is a price-weighted index of 30 large-cap companies. It's final value is modified using a divisor known as the Dow Divisor, which accounts for stock splits and similar events that have occurred since a stock has joined the index. Thus, points when referring to an index do not typically represent dollars. Rather, they serve as a quantitative measure of how the market is doing based on the performance of the index constituents. ETFs like SPY add a layer of abstraction by creating an investible vehicle that ideally tracks the value of the underlying index directly. Finally, neither price nor index value is related to volume. Volume is a raw measurement of the total number of shares traded for a given stock or the aggregate for a given exchange. Hope this helps! "I think that the general public is conditioned to think more in terms of points rather than percentages, so that 200 points is easier to fathom than the equivalent percent. We all translate internally what this means. Of course it is less precise, but it also makes for good copy in the publishing industry (""Market Down 1000 points!"")" Points are index based.  Simple take the total value of the stocks that compose the index, and set it equal to an arbitrary number. (Say 100 or 1000)  This becomes your base.  Each day, you recalculate the value of the index basket, and relate it to the base.  So if our index on day 0 was 100, and the value of the basket went up 1%, the new index would be 101 points. For the example given, the percentage change would be (133.32 -133.68  ) / 133.68 * 100% = -0.27%  Keep in mind that an index basket will change in composition over time.  Assets are added and removed as the composition of the market changes.  For example, the TSX index no longer includes Nortel, a stock that at one time made up a significant portion of the index.  I'm not sure if a percentage drop in an index is really a meaningful statistic because of that.   It is however, a good way of looking at an individual instrument.
"Oh, I understand now -- we're having an absurd, meaningless conversation about an obscure theoretical point.  When you can tell me how you can determine a ""minimum cash"" level from a public company's filings, we can continue the discussion.  Otherwise, make a simplifying assumption and move on.  I misunderstood -- I thought we were actually trying to understand the difference between enterprise value and equity value / understand the implication of an enterprise value multiple." "It's only a ""loss"" if you believe the purpose of indexes is to represent the basket of underlying companies with the highest returns.  But that's simply not true.  An index is just a rules-based way to track/measure a thing.  That thing could be the largest US companies, all the companies in a specific sector, all of the companies in the world, a commodity or basket of commodities... Pretty much anything.  Somebody just has to write down the explanation of what an index tracks, then create ETFs to track the index.  By being a ""passive investor"" you are still making active investing decisions to some degree, in that you need to decide which indexes to passively invest in.  If people are not going to attempt to understand the companies they invest in because they're almost certainly better off indexing (which is fine), then the responsibility must fall on someone to make decisions about what are the best rules for the indexes.  For most of the history of capital markets, good corporate governance has been enforced by shareholders.  If management did something bad, shareholders could vote to replace the Board of Directors and in general they had tools to hold management accountable.  Only in recent years, founders of companies like Google, Facebook, Snap, etc., have attempted to subvert this relationship (public shareholders give a company money, and in return the company must answer to the shareholders) and essentially take money for nothing.  So far (it's still a pretty short experiment) this has worked as long as the share price is going up, but what happens when it doesn't?  What happens when these companies screw up and stop performing well, and there's nothing shareholders can do about it?  Investors who intentionally own individual shares will have little to no leverage to demand change, and passive investors would be stuck with some of their money in these companies with terrible governance - and the precedent would only make dual-class and non-voting shares more attractive for future IPOs, making the problem more prevalent.  If you think it is in your best interest to own the entire S&amp;P 500, *plus* Snap, then just do that.  For every dollar you invest into SPDR or something similar, allocate something like $0.01 into Snap.  It's that simple.  But don't make this out to be a story about how S&amp;P is anti-free markets or doing a disservice to investors.  That's ridiculous.  If most Americans are just going to blindly put their retirement savings into index funds without bothering to understand them (again, which is fine) then somebody needs to make sure the companies in said indexes are good companies.  Historically, a company with zero corporate governance and entrenched management =/= a ""good company"".  S&amp;P realized this and decided to set a good precedent for US equity markets rather than a very bad precedent.  You wanna buy shares with no voting rights?  Go for it.  But that should be your decision, not a default inclusion in major indexes." As has been said before, going from nothing to something is an infinite percent increase! It is not 100%. Maybe you had a dollar and now have $101 that is a 10000% increase! Quite remarkable. I often work with symmetrized percent changes like: spc = 100 * (y2-y1)/(0.5 * (y1+y2)) Where I compute the percent with respect to the average. First this is more stable as often measurements can have noise, the average is more reliable.  Second advantage is also that this is symmetric. So going from 95 to 105 is a 10 % increase while going from 105 to 95 a 10% decrease. Of course you need to explain what you show. In my original question, I  was wondering if there was a mathematical convention to help in deciding on whether an equity offering OR debt offering would be a better choice. I should have clarified better in the question, I used Vs. which may have made it unclear. The methodology for divisor changes is based on splits and composition changes. Dividends are ignored by the index. Side note - this is why, in my opinion, that any discussion of the Dow's change over a long term becomes meaningless. Ignoring even a 2% per year dividend has a significant impact over many decades.  The divisor can be found at http://wsj.com/mdc/public/page/2_3022-djiahourly.html "NYT republished a nifty infographic that shows how the S&P 500 performs over various time horizons. If you study it for a bit, you'll see that 10 percent is not likely over time that you'll earn 10 percent annually after inflation. Most people quoting the higher number are working with numbers before inflation.  The above linked chart is misleading in the following sense: it groups into five categories, who's boundaries are demarcated by percentages of interest. But we'd rather see them clustered by those percentages. For example, 6.9 percent falls into the neutral category (better than investing in fixed interest securities, but still below market average), but 7.1 falls into the ""above average"" category. The effect is that we will treat the neutral color that dominates the long term trend as being somewhere in the middle of 3-7, when I suspect that's not the case. Some day I'll probably make my own version and see how that plays out.  So that all said, if you look at the 30 year diagonal, you can see there's still quite a bit of variation in returns. Unfortunately I can't turn this into a single number for you, but grab a spreadsheet and some market data if you want one." IRR is not subjective, this is a response to @Laythesmack, to his remark that IRR is subjective. Not that I feel a need to defend my position, but rather, I'm going to explain his.  My company offered stock at a 15% discount. We would have money withheld from pay, and twice per year buy at that discount. Coworkers said it was a 15% gain. I offered some math. I started by saying that 100/85 was 17.6%, and that was in fact, the gain. But, the funds were held by the company for an average of 3 months, not 6, so that gain occurred in 3 months and I did the math 1.176^4 and resulted in 91.5% annual return. This is IRR.  It's not that it's subjective, but it assumes the funds continue to be invested fully during the time. In our case the 91.5% was real in one sense, yet no one doubled their money in just over a year.  Was the 91% useless? Not quite. It simply meant to me that coworkers who didn't participate were overlooking the fact that if they borrowed money at a reasonable rate, they'd exceed that rate, especially for the fact that credit lines are charged day to day. Even if they borrowed that money on a credit card, they'd come out ahead.  IRR is a metric. It has no emotion, no personality, no goals. It's a number we can calculate. It's up to you to use it correctly. The risk of the particular share moving up or down is same for both.   however in terms of mitigating the risk, Investor A is conservative on upside, ie will exit if he gets 10%, while is ready to take unlimited downside ... his belief is that things will not go worse .. While Investor B is wants to make at least 10% less than peak value and in general is less risk averse as he will sell his position the moment the price hits 10% less than max [peak value] So it more like how do you mitigate a risk, as to which one is wise depends on your belief and the loss appetite I'm not 100% familiar with the index they're using to measure hedge fund performance, but based on the name alone, comparing market returns to *market neutral* hedge fund returns seems a bit disingenuous.  That doesn't mean the article is wrong, and they have a point about the democratization of data, but still. Of course, this calculation does not take into consideration the fact that once the rights are issues, the price of the shares will drop. Usually this drop corresponds to the discount. Therefore, if a rights issue is done correctly share price before issuance-discount=share price after issuance. In this result, noone's wealth changes because shareholders can then sell their stock and get back anything they had to put in. "What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. ""Annual earnings are $1. What is the share price?"" ""Question has no answer""" In my mind its not the same.   If growth is stock value then this is incorrect because of compound interest in stock price. $100 stock price after one year would be $105 and a dividend would be $2 Next year the stock would be  $110.20 (Compound Interest) and would the Dividend really go up in lock step with the stock price? Well probably not, but if it did then maybe you could call it the same. Even if the dollars are the same the growth rate is more variable than the dividends so its valuable to segregate the two. I am open to criticism, my answer is based on my personal experience and would love to hear contrary positions on this. Yep, you have it pretty much right.   The volume is the number of shares traded that day. The ticker is giving you the number of shares bought at that price in a given transaction, the arrow meaning whether the stock is up or down on the day at that price.   Institutional can also refer to pensions, mutuals funds, corporates; generally any shareholder that isn't an individual person. "What does ""points"" mean In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out.  A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is ""X"". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily. S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes." This was not the point of confusion. I said that the dy increased and that this means the investment is performing fairly well being that we don't know the stage the company is in or anything about the health of the economy. He said with the given information the investment is performing poorly. This is where we disagreed.