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    Are blue chip stock market indices good proxies for all-shares market indices? The case of the Brussels Stock Exchange 1833-2005

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    Date
    2011
    Author
    Annaert, Jan
    Buelens, Frans
    Cuyvers, Ludo
    Deloof, Marc
    De Ceuster, Marc
    De Schepper, Ann
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    Abstract
    In this article, we calculate a market-weighted return index for the 20 largest stocks listed on the Brussels Stock Exchange over the period 1833–2005, based on a new, unique and high-quality database. We find that this index captures the most important stylised facts of the value-weighted return of all shares listed on the Brussels Stock Exchange in this period. Our results support the empirical practice of concentrating on just the largest stocks. The indices we construct are based on one of the longest Belgian time series available. The indices take into account the exact dividends, the timing of the dividend cash flows and all capital operations. We are therefore able to decompose total returns into capital gain returns and dividend returns, which is not possible with most historical return series. We show that, to construct a credible return index, it is crucial to fully take into account dividends.
    URI
    http://hdl.handle.net/10394/7445
    http://dx.doi.org/10.1017/S0968565011000187
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    • Faculty of Economic and Management Sciences [1428]

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