wayward's - exaggeratiom of emotion friday, page-110

The thing with most equity markets is that they are constructed in a way that inevitably they will always go up more than down. This has little to do with profit loss and a great deal to do with an out with the weak in with the strong mentality. Using the XJO as an example, so much in our and even world economy occurs as a result of what the xjo does. The XJO isn't made up of a mixed bag of random stock, it's constructed of the top our market can provide, generally on a market cap basis. If a stock doesn't perform, it's weighted down, if it performs poorly over a period then it's out to make way for a growth company.

>The S&P/ASX indices only include securities that are considered to be institutionally investable, and market capitalization is a key criterion for stock selection. Stocks are included if they are large enough to meet the minimum ranking requirements for the representative indices within the Australian market.
The market capitalization criterion for stock inclusion is based upon the daily average market capitalization of a security over the last six months. The stock price history (last six months), latest available shares on issue and the Investable Weight Factor (IWF) are the relevant variables for the calculation. The IWF is a variable that is primarily used to determine the available float of a security for ASX listed securities.<

As a result, XJO over the long term will always find support partly from how the companies within the index are performing and largely to do with how the index is constructed. Bears will always have a harder time overall.