Question

Problem 8-1 Advance/Decline Lines (LO4, CFA1)

Use the data below to construct the advance/decline line for the stock market. Volume figures are in thousands of shares. (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to the nearest whole number.)

	Stocks Advancing	Advancing Volume	Stocks Declining	Declining Volume
Monday	1,772	829,713	1,603	687,046
Tuesday	1,764	828,360	1,349	448,665
Wednesday	1,778	623,869	1,611	720,004
Thursday	2,499	1,105,356	541	173,415
Friday	1,580	509,766	1,463	498,085

Adv./Dec. Cumulative

Monday. _________ __________

Tuesday _________. __________

Wednesday __________ __________

Thursday. __________ __________

Friday. __________ __________

Answer 1

Ans: 8-1 Now according to the question we have to use the above data to find Advance/Decline ratio which is an important tool in technical analysis.

Now Formula to find Advance/Decline ratio we have to subtract the no of stocks that finished lower on the day with the no of stocks that is higher on the day.

Therefore the formula for Advance/decline= stock advancing -stock declining.

Now calculating the Adv/Dec and Cumulative for the given stock would be

Days Adv/Dec Cumulative for the stock

Monday 1772-1603 = 169 169

Tuesday 1764-1349 =415 415+169=584

Wednesday 1778-1611=167 584+167=751

Thursday 2499-541=1958 751+1958=2709

Friday 1580-1463=117 2709+117= 2826

Here we have subtracted stock advancing from stock declining to find the AdV/Dec ratio and then we have calculated cumulative by adding Adv/Dec ratio result with the consecutive days of Adv/Dec ratio result.