The SC 20 is a tool for interested parties to gauge the performance of stocks of publicly traded companies domiciled in South Carolina.  The index is an equal weighted index as compared with a cap-weighted index, such as the well-known Standard & Poor’s 500.  The equal weighted methodology was chosen because of the wide divergence between the market capitalizations of larger companies in South Carolina and those of smaller companies.

 

Indices based on market capitalizations measure the overall gain or loss of wealth in the index and place greater weight on the performance of larger companies, as measured by market capitalization.  Equal weighted indices, on the other hand, treat the performance of small companies on an equal basis as that of large companies.  Thus, the equal weighted index is a better overall measure of the individual returns of a basket of stocks.  The goal of the SC 20 is to gauge the average return to shareholders of companies comprising the index, thus an equal weighted approach was chosen.

 

The index is calculated by taking the one-day return of each of the twenty stocks comprising the index each day, then calculating the arithmetic average of those returns.  This average return is then applied to the index number from the previous day.  A simplified example utilizing three stocks will serve to illustrate.  Assume the following one-day returns to stocks A, B and C:

 

Stock               Return

A                        5%

B                      10%

C                      15%

 

The overall average return is 10%.  If the index the previous day had been 100, the index today would be calculated as 100 * 1.1 = 110.

 

CCM Investment Advisers, LLC does not offer any investment products based on the SC 20 and does not recommend utilizing the information as an investment strategy.