Two IUPUC students have created a regional stock index to provide an instant assessment of the local economy.
The Columbus Area Stock Index, or CASI, includes 22 publicly traded companies of local and regional importance, including Kroger, Wal-Mart and Cummins Inc.
IUPUC accounting and finance majors Robert Simpson and Randy Pangburn created the index as a research project after they took a class in which they created an Indiana stock index.
After the class, their professor, Michael Oakes, asked if somebody wanted to create a Columbus index.
“We thought it would be fun,” said Simpson, 23, a senior.
Pangburn, 22, also a senior, said the team wanted to explore how closely a local index would follow larger, more well-known indices such as the S&P 500.
Simpson said the team chose companies for the index that were based in Columbus or have a significant presence or influence in or near Columbus.
The selection proved challenging, Pangburn said, in part because many important local companies are not publicly traded. Others, such as Wal-Mart, have the vast majority of their operations outside of Columbus. Nonetheless, he said the success or failure of those companies affects Columbus.
Oakes, MBA director and senior lecturer in finance at IUPUC, said the assignment included the critical element of figuring out how to weigh the stocks.
The team decided to weigh the stocks by market capitalization, a measurement of the total value of stocks in a company.
It is calculated by multiplying stock price, which is reported daily, with shares outstanding, which is reported quarterly.
Simpson said the project involved a lot of data crunching. For each of the 22 companies on the index, the team had to gather nearly 1,000 data points.
He said the project required hard work and good Microsoft Excel skills.
And, Pangburn said, “a lot of teamwork and several very late nights.”
The bulk of the work involved tracking how well the index compared to other indexes, Pangburn said.
The CASI has shown a strong correlation to nationwide and even global trends, he said.
That means that the local economy has globalized and is no longer as segmented as it used to be, Pangburn said.
Oakes and IUPUC junior Kayla Freeman, who has taken over the duties of updating the index, said they are considering tweaking the index somewhat to give some local companies more weight.
Wal-Mart, the largest component of the index, accounts for about 20 percent, while Cummins, by far the largest local employer, makes up just 2 percent.
Tying the components to local employment might provide a better reflection of the local economy, Freeman and Oakes said. Freeman updates the index weekly.
The index can provide policymakers, the business community and political leaders with a better insight into the health of the local economy, Freeman said.
Oakes and Freeman said they soon hope to be able to make the index available to the public.
The project allowed students to apply some of their knowledge and learning on a project with real-world applications, Oakes said.
“Without that context, student outcomes can be diminished by the absence of any relevance between key concepts and the everyday world,” he said.
Pangburn said the project allowed the team members to use their knowledge to create a valuable tool for the community.
“Definitely better than sitting in a classroom,” Simpson said.
Simpson, a Trafalgar native, works for Elwood Staffing and plans to become a certified public accountant.
Pangburn, of Franklin, works for the Heritage Fund and will join Cummins in August.