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Market Return (Datastream)

Comparing the performance of one or more companies with “the market” is a common task. Researchers need to choose a time-series that provides a good estimate of the market, and then check that the data they want is available for the relevant time period. (In this post we use Thomson Reuters Datastream as the data source)

UK market return (yearly) from Datastream

UK market return (yearly) from Datastream (click to expand)

For the UK market the FTSE All Share is a common choice. This is a broad based equity index that represents the UK market. The FTSE All Share and the FTSE 100 are the two equity indices that Datastream lists as benchmark indices for the UK.

  • FTALLSH datatype RI – the total return, including reinvestment of dividends, for the FTSE All Share is avaliable from 1986.

There are a number of companies that provide a large number of indices and one of these might be the best choice if you are looking across multiple countries or looking for a market index and a more specific sector index.

  •  TOTMKUK datatype RI – the total return for the Total UK Market from Datastream is available from 1966.
  • SBBUKD£ datatype RI – the total return for the Standard and Poor’s Broad UK market index in local currency (£) only has data from 1990.
  • MSUTDKL datatype MSRI – the total return for the MSCI UK Country Index in local currency (£) is available from 1970.
    Here you have to remember that the MSCI indices have slightly different dataypes, e.g. MSRI rather than RI.

The general formula used is DPL#(PCH#(X(RI),1Y),4) – the percentage change in the series (X), datatype RI, over 1 year calculated to four decimal places. This can easily be changed to give monthly, weekly or daily data, or you can get the index value from Datastream and perform the calculation in Excel.

For the China market things are not so straightforward.

China market return from Datastream (click to expand)

China market return from Datastream (click to expand)

Two China market indices in Datastream “Benchmarks at a Glance” equity indices list are Shanghai SE A Share and Shenzhen SE B Share.

  • CHSASHR – Shanghai does not offer the total return RI datatype, only the price index PI is available. PI is available from 1993.
  • CHZBSHR – Shenzhen does not offer the total return RI, only price return PI – again available from 1993.
  •  TOTMKCA datatype RI – the total return for the Total China Market from Datastream is available from 1995.
  • SBBCHNL datatype RI – the total return for the Standard and Poor’s Broad UK market index in local currency (CH) only has data from 2007.
  • MSICHFL datatype MSRI – the total return for the MSCI China Country Index in local currency (CH) is available from 1995.

All of these indices are in the Chinese Yuan Renminbi currency except for Shenzhen SE B Share, which is in Hong Kong Dollar.

The yearly return values given by these different broad market indices for China vary more widely than those for the UK. Each index provider selects their rules for including stocks that considered investable. In an emerging market such as China there is more difference between what providers choose to include in their country index, and therefore in the observed returns for those indices.

Datastream Request Table for market return results above

Datastream Request Table for market return (click to expand)

Datastream Request Table for market return (click to expand)

This post has provided examples using Thomson Reuters Datastream as the source of equity indices. The same issues have to be considered when choosing a market index from Bloomberg Professional, S&P Capital IQ, or any other source.

 Related posts

Total shareholder return (share price return) (July 2011) gives more detail on calculating total return

S&P 500 (Standard and Poor’s 500 Index) (December 2011) gives sources for the S&P 500 a common choice for the US market

Returns in 2012 (January 2013) illustrates the difference between total return (reinvesting dividends) and price return

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