SimpleGift wrote: ↑
Thu Apr 12, 2018 3:40 pm
nisiprius wrote: ↑
Thu Apr 12, 2018 12:24 pm
P.S. I don't think "S&P 90" index is right, by the way. I've been trying to unscramble this story for some time but still don't quite have it. There was a "Standard & Poor's Composite Index" that was calculated daily, and at some point another one with several hundreds that was calculated weekly. I think the Composite Index had 90 stocks when the S&P 500 was introduced in 1957, but I don't think it was constrained to have exactly 90.
You're mostly correct. In researching this topic, I ran across this 2002 paper and the quoted text below (my bold):
An Analysis of the S&P 500 Index and Cowles’s Extensions: Price Indexes and Stock Returns, 1870–1999
Wilson & Jones wrote:It is important to understand clearly that there were actually two different S&P “Composite” Indexes. First, there is the weekly index (the “all stocks” index) as described above. Second, a daily index of 90 stocks, consisting of 50 industrials, 20 rails, and 20 utilities, was initiated in 1928 (and carried back weekly to December 1925). Going forward, this index of 90 stocks continued until March 1957, when the daily index was shifted to the 500 stocks.
In March 1957, S&P abandoned its historical weekly series with the statement, “To avoid confusion, Standard & Poor’s has standardized on its former daily price index . . . for the back record.” This caution by S&P was repeated in the biennial editions of their historical data (the “Blue Books”) for many years, but is not mentioned in recent editions. Simultaneously, S&P ceased estimating the S&P 90 Index. The decision to abandon the historical record of the broad-based weekly index in favor of the S&P 90, which ceased, has been the cause of much confusion.
According to this paper, the Ibbotson historical data series going back to 1926 is based on the S&P 90 daily data (starting in December 1925), rather than the more broadly-defined S&P weekly data (with 200-400 stocks). Interesting to know!
Here's some more info on the S&P index history from Reuters. I have somewhere a paper authored by David Blitzer of the index committee that gives more historical detail if I can find it. Note that Reuters is quoting a paper that was produced by S&P I believe:
Timeline: Key dates and milestones in the S&P 500's history
6 MIN READ
NEW YORK (Reuters) - Standard & Poor’s, initially known as the Standard Statistics Company, created its first stock market index in 1923. It consisted of the stocks of 233 companies and was computed weekly.
Three years later, it developed a 90-stock composite price index computed daily. That was expanded over the years.
On March 4, 1957, the Standard & Poor's 500 .INX .SPX was introduced.
The S&P 500 index has became synonymous with the term “U.S. stock market.” It is one of the leading benchmarks for the market, even though others, including the Russell and Wilshire indexes, are broader measures of the market. Still, investors use the S&P 500 as the main index to measure their portfolios’ performance against, with about $5.58 trillion benchmarked to the S&P 500.
The S&P’s 500 companies represent the U.S. market more broadly than the Dow Jones industrial average, which includes the stocks of only 30 companies.
American Telephone and Telegraph was the heaviest-weighted stock in the index in 1957. The company, now known as AT&T (T.N), is the 11th-largest company in the S&P 500 index.
Today the S&P 500 index has a total market cap of $14.6 trillion. Sixty-nine of the 500 original companies remain in the S&P 500 today.
Below are some key dates and milestones in the history of the S&P 500.
1923: Standard Statistics Company, as S&P was formerly known, develops its first stock market index consisting of the stocks of 233 U.S. companies, computed weekly.
1926: Standard Statistics creates a 90-stock composite price index computed daily.
March 4, 1957: The Standard & Poor’s 500 index is introduced, tracking the performance of the stocks of 500 leading U.S. companies. With a total market capitalization of $172 billion, the S&P 500 followed the performance of 425 industrial, 15 rail and 60 utility stocks.
1958: S&P 500 ends the year up 38.06 percent, its best year in terms of percentage gain.
June 4, 1968: S&P 500 closes above 100 for the first time.
August 31, 1976: Vanguard introduces the first retail index mutual fund, the Vanguard First Index Investment Trust, which tracks the S&P 500, allowing individual investors for the first time to buy into the broad market with a single purchase. The fund, now known as the Vanguard 500 Index Fund (VFINX.O), has $125 billion in assets.
April 21, 1982: The Chicago Mercantile Exchange begins trading futures based on the S&P 500.
July 1, 1983: Options contracts based on the S&P 500 index begin trading on the Chicago Board Options Exchange.
Oct 19, 1987: S&P 500 registers its worst daily percentage loss, falling 20.47 percent. The one-day crash, known as “Black Monday,” was blamed on program trading and those using a hedging strategy known as portfolio insurance. Despite the losses, the S&P 500 still ended up that year.
January 22, 1993: State Street’s Standard & Poor’s Depositary Receipts, or the SPDR S&P 500 (SPY.P), an exchange-traded fund that tracks the S&P 500’s performance, begins trading on the American Stock Exchange. It was the first ETF to trade in the United States. The first SPDR and the many variations that followed are commonly referred to as the “spiders.” The fund currently has about $133.8 billion in assets, making it the largest exchange-traded fund in terms of assets.
September 9, 1997: CME introduces the S&P E-mini futures, which is valued at $50 multiplied by the price of the S&P 500, or one-fifth of the size of the “big” S&P futures contract. It has since become the most heavily traded futures contract on the CME.
February 2, 1998: S&P 500 closes above 1,000 for the first time.
March 24, 2000: The S&P 500 index reaches an all-time intraday high of 1,552.87 during the dot-com bubble.
March 24, 2004: Trading begins in futures on the VIX .VIX, the CBOE Volatility Index measuring implied volatility of S&P 500 index options. The VIX is known as the market’s “fear gauge.” It tends to rise when stocks fall. It recently fell to levels not seen since April 2007.
Standard & Poor's Corp
.SPXCHICAGO BOARD OPTIONS EXCHANGE
March-September 2005: The index is transitioned from simply market-value weighted to float adjusted, where the market capitalization is calculated using only the number of shares available for public trading.
October 9, 2007: Index closes at a record high of 1,565.15.
October 11, 2007: S&P 500 hits intraday record high of 1,576.09.
Oct 13, 2008: S&P 500 marks its best daily percentage gain, rising 11.58 percent. It also registers its largest single-day point increase of 104.13 points.
2008: For the year, S&P 500 falls 38.49 percent - its worst yearly percentage loss. In September 2008, Lehman Brothers collapsed as the financial crisis spread.
March 9, 2009: S&P 500 closes at 676.53, its closing low after the onset of the 2008 financial crisis and the Lehman Brothers’ bankruptcy.
August 20, 2012: Apple (AAPL.O) becomes the biggest U.S. company and takes over as market capitalization leader in the S&P 500, pushing Exxon Mobil (XOM.N) into the No. 2 spot. Since then, Exxon and Apple have gone back and forth between the two spots, but Apple is currently No. 1 with a market cap of about $416 billion. Exxon has a market cap of $404 billion.
March 28, 2013: S&P 500 ends above 1,569 - setting a record closing high and surpassing the previous milestone set in 2007.
Sources: S&P Dow Jones Indices Senior Index Analyst Howard Silverblatt, the Standard & Poor’s book, “Innovation & Evolution, The S&P 500,” CME, CBOE, Vanguard Group Inc, State Street Global Advisors, Thomson Reuters.
Reporting by Caroline Valetkevitch; Editing by Jan Paschal
Our Standards:The Thomson Reuters Trust Principles.