A stock market index is a statistical tool that measures the price movement of the securities that make it up. Stock market indices are therefore representative indicators of the financial market. True barometers of a market or a sector (in the case of sector indices), they are both an instrument for measuring market behavior or trend and a useful comparison tool for investors and managers. of wallets.
On a stock market, the creation of an index responds above all to the need to synthesize information and the evolution of this index reflects the degree of confidence that investors place in stock market products or in other words, it makes it possible to judge the attractiveness of market products for investors. Most major stock market indices are calculated by adding the market capitalizations of the companies that make them up and then dividing the sum obtained by a constant value so that the value of the index is a relatively small number. For example 100 or 1000 are chosen when creating an index. The best-known indices are those which bring together the stocks with the largest market capitalizations in a country or a geographical area.
Indices at the BRVM (Regional Stock Exchange)
The formulation and selection criteria for the BRVM indices are based on the major stock market indices of the world, in particular the index of the International Financial Corporation Global, an affiliate of the World Bank.
According to the eligibility criteria for the regional stock exchange indices, the issuer must be composed and reside in a WAEMU country for tax reasons; And only ordinary shares are eligible, therefore the net asset values of investment funds are not taken into account in the index.
At the BRVM, there are two main indices representing the activity of securities on the equity market: these are the BRVM 10 and the BRVM Composite. To these two indices, we must add seven sectoral indices concerning companies in the sectors of agriculture (5 companies), industry (7 companies), public services (4 companies), finance (15 companies), transport (2 companies), distribution (7 companies) and other sectors (1 company). However, the evolution of share prices is reflected by nine indices: BRVM Agriculture, BRVM Others, BRVM Industrie, BRVM Services Publics, BRVM Finance, BRVM Transport, BRVM Distribution, BRVM 10 and BRVM Composite.
The BRVM 10 index
It is made up of the ten most active or more simply the most liquid companies on the market, that is to say the listed companies whose shares have been bought or sold the most. The notion of liquidity occupies a fundamental place in the selection of stocks making up the BRVM 10 index. This index is therefore updated four times a year, ie every quarter (the first Monday of the months of January, April, July and October).
Among other things, the criterion for choosing companies is rigorous and complies with international standards. Thus, the companies of the BRVM 10 are subject to specific conditions which are as follows: the average amount of transactions during the three months preceding the quarterly review, must not be lower than the median of the average daily amounts of transactions of the ‘set of titles. And the frequency of transactions should always be above 50%, that is, the security should trade at least once in two, during the three-month study period.
The BRVM Composite index
The BRVM C is a general index. It takes into account all companies listed on the BRVM. It is adjusted each time a new company is listed (but also in the event of a capital increase or reduction), so as to be adapted to changes in the Regional Financial Market. This index can also be modified by the variations of a capitalization of considerable value. The BRVM C is therefore very sensitive to the capitalizations of large securities.
At the BRVM, the indices are quoted continuously, that is to say every 15 minutes. They are automatically generated by the BRVM trading system and are broadcast after each trading session. As financial information is subject to regular changes, it is therefore published quite often. The Regional Exchange of Securities which was created on December 18, 1996 happens to be a fully integrated electronic market with its eight member countries of West Africa: Benin, Burkina Faso, Ivory Coast, Guinea -Bissau, Mali, Niger, Senegal and Togo. In addition to equity instruments namely stocks, the BRVM offers the issuance and trading of debt instruments such as bonds. BRVM is therefore a world-class trading environment with state-of-the-art trading and delivery systems that can benefit investors.
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