A security analyst wishes to construct an index to reflect the changes in the price of five stocks in a certain portfolio. The following figures represent the average price and numbers of shares purchased for each stock for 1988-1990:
|
1988
|
1989
|
1990
|
|
Stock
|
Average Shares
Price Purchased
|
Average Shares
Price Purchased
|
Average Shares
Price Purchased
|
|
A
|
35 110
|
45 210
|
40 215
|
|
B
|
55 210
|
50 160
|
55 115
|
|
C
|
65 160
|
85 260
|
75 115
|
|
D
|
50 310
|
55 260
|
60 215
|
|
E
|
25 200
|
30 210
|
40 310
|
a. Construct an unweighted aggregate index using 1988 as a base year. What are the disadvantages of this type of index?
b. Construct a Laspeyers index using 1988 as a base year. What are the disadvantages of thus type of index?
c. Construct a Paasche index using 1988 as a reference base year. What are the disadvantages of this type of index?