Value Line Composite Index

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Value Line Composite Index

The Value Line Composite Index is a broad stock index that tracks roughly 1,700 companies from major North American markets, including the NYSE, American Stock Exchange, Nasdaq, Toronto exchanges, and over-the-counter listings. It reflects the universe of companies covered in the Value Line Investment Survey (excluding closed‑end funds) and is published by Value Line Inc.

Two forms of the index

The Value Line Composite is published in two distinct versions, each emphasizing a different method of averaging stock returns.

Geometric Composite Index

  • Introduced June 30, 1961.
  • Equally weighted using a geometric mean.
  • Daily change is computed by multiplying each stock’s price ratio (today’s close ÷ yesterday’s close) and taking the Nth root, where N is the number of stocks. In effect, this produces a return closest to the median stock’s movement and reduces the influence of extreme winners and losers.

Arithmetic Composite Index

  • Introduced February 1, 1988.
  • Equally weighted using an arithmetic mean.
  • Daily change is the average of each stock’s percent change. This mirrors the percent change an equal‑dollar portfolio of all component stocks would experience on a given day, giving larger influence to extreme moves than the geometric version.

Composition and maintenance

  • The number of companies varies over time due to additions, delistings, mergers, bankruptcies, and Value Line’s coverage decisions.
  • The selection goal is to provide a broad representation of the North American equity market; individual company moves between exchanges or listings do not change the methodology for either index form.

Why it matters

  • Offers an equal‑weight perspective on the market, rather than a market‑cap weighted view.
  • The geometric version provides a median‑type measure of performance; the arithmetic version approximates an equal‑dollar portfolio’s return.
  • Useful to researchers and investors who want to evaluate broad market behavior without the concentration effects of large‑cap weighting.

Key takeaways

  • The Value Line Composite Index covers a large, broadly representative set of North American stocks (~1,700).
  • It exists in two forms: geometric (equal‑weighted, median‑like behavior) and arithmetic (equal‑dollar portfolio equivalent).
  • Component count and composition change over time due to market events and coverage choices, but the index methodologies remain constant.