About Lesson
The main uses of the security market indexes are:
a. To gauge the market sentiments. The security market indices are good indicators of the collective opinions of market participants. Thus it could be helpful in analyzing the market sentiments.
b. These indices can be used as proxies for measuring or modeling the returns, systematic risk, and risk-adjusted-performance.
c. The indices can be used as proxies for asset classes in asset allocation models. The indices also provide the historical data used to model the risk/return of different asset classes.
d. The indices could be used as a benchmark for actively managed portfolios.
e. The indices serve as the basis for the creation of investment products.