alt Hacker NewsAt a fundamental level, an index is supposed to reflect the market. If the current market is IPO-ing unprofitable companies at absurd multipliers, the index should reflect that. Because that is the market.
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Replies
rurp • today at 2:17 PM
No, an index reflects a specifically defined subset of the market. The S&P 500 is very much not trying to include the entire stock market. There are more than 500 public companies...
yfg2 • today at 3:51 AM
Why do index inclusion rules exist in the first place….?
Go do a google search
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Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.
As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.