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Are blue chip stock market indices good proxies for all-shares market indices? The case of the Brussels Stock Exchange 1833–20051

Published online by Cambridge University Press:  27 September 2011

Jan Annaert ,
Frans Buelens ,
Ludo Cuyvers ,
Marc De Ceuster ,
Marc Deloof  and
Ann De Schepper
Jan Annaert
Affiliation:
University of Antwerp, [email protected]
Frans Buelens
Affiliation:
University of Antwerp, [email protected]
Ludo Cuyvers
Affiliation:
University of Antwerp and North-West University, South Africa
Marc De Ceuster
Affiliation:
University of Antwerp
Marc Deloof
Affiliation:
University of Antwerp and Université Catholique de Louvain
Ann De Schepper
Affiliation:
University of Antwerp
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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.

Keywords

stock return indicesBrussels stock exchangecapital gaindividends
Type
Articles
Information
Financial History Review , Volume 18 , Issue 3 , December 2011 , pp. 277 - 308
Copyright
Copyright © European Association for Banking and Financial History e.V. 2011

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References

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