The purpose of this blog is to track the Investor's Business Daily's IBD100 list through an index format that makes it a useful indicator and asset for those using the IBD list of stocks as investment/trading vehicles.

How the index is calculated:

This IBD tracking index is intended to track the overall performance of the IBD100 in a way that closely follows the returns one might expect by investing in each of the 100 stocks that make up the list. The index is calculated in the following way:

Upon entry to the list, 1000 is divided by a stocks previous close to arrive at a security's weighting factor (1000/C). This weighting factor is calculated to 5 decimal places and maintained at its original value throughout its duration on the IBD100. This method is used to equally weight each company as it is added to the index.

Each day, the open, close, high and low of each stock is multiplied by its weighting factor to arrive at its present value. These values are then summed and multiplied by .0005 to arrive at the index's current value. The index was created on 03/04/08 and started with a value of $50.00 (100*1000*.0005).

The challenge is how to prevent gaps in the index each time new companies are added or dropped from the list. To accomplish this, I have introduced a rebalancing factor that is multiplied by the total present value to arrive at the index’s net index value (NIV). This rebalancing factor is adjusted each week so that the NIV has the same value after updating the list as before.

The main concepts behind all of this is that all new entries to the list begin with a present value of 1000 which serves to equally weight each entry to the list irregardless of price and the NIV will remain consistent from week to week as stocks are added and dropped.

Volume is calculated by adding the volume of all 100 stocks and dividing this number by 100 to keep the number to a reasonable length and to also represent the "average" volume of each individual stock.

Once enough data is accumulated, I will begin to post historic charts and make CSV files available for download that can be used in charting and/or backtesting software.

## Wednesday, March 5, 2008

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## 1 comment:

Just found your blog and am looking forward to catching up on all of your posts. You will certainly be a busy man.

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