TruthScape.com  9  TruthScape Weighted Index of RuneScape Prices (TWIRP)       9  Understanding TWIRP

Understanding Yield, Income, Cost, Affordability and Composite Indexes TWIRP Limitations and Caveats

My current plan is to issue a TWIRP report every week. Each report will include an update showing the current values of each of the approximately 60 indexes that I am publishing, as well as the change from the previous week's figures. The indexes are generally listed so that the highest-level (broadest) indexes come first, with increasingly specific ones following for those who want more details.

In addition to the raw data, I will also be writing a short economic analysis each week that gives my views on notable market changes in that period, and possibly what I feel the reasons are behind some of the more interesting changes.

Here's a brief outline of the process and how to interpret the reports.

All of the TWIRP indexes are computed, directly or indirectly, from the current market prices of a set of over 300 essential RuneScape items. These items span the breadth of the game and collectively represent the bulk of the RuneScape economy; for details see "Item Selection".

Price information is determined by checking the current Grand Exchange price for each item. I always use the average market value price. Please bear in mind that items on the GE may not be actively trading right at the market value, but this is the only reasonable assumption I am free to make at this time with the information available. Please see the next topic on Limitations and Caveats for more information on some of the pitfalls with GE data.

In most cases I will conduct my data gathering on Sunday evening (U.S. East Coast time) in order to publish a new TWIRP report the following Monday. However, please bear in mind that I am a single individual and do have other obligations, so I do not guarantee that the weekly report will be on Monday every week. Slight differences in the exact date and time of when data is collected (say, on Monday morning instead of Sunday evening) should not have a big impact on the value of the indexes.

Having gathered all of the price information, I feed this data into a set of special formulas that computes the various high-level and low-level indexes. As mentioned earlier in this section, the indexes track the cost and output value of various skills, activities and item types.

All indexes are recorded as weighted averages of the percentage change of item prices between their initial base value and their current value. The base values for most items were recorded on December 31, 2007; new items added to the indexes later on will obviously start out with base values recorded later on.

The indexes (with one special exception) are expressed as a number that represents the relative change in that index from an initial value of 100. For example, if the value of an index is 90, that means the index has dropped by 10% since TWIRP began; if it is 110, then the index has gone up by 10%. Again, all indexes began at 100 on December 31, 2007.

Here's a very simplified example that shows how an index might be calculated. Suppose that we had a fictional skill called "Hopscotching" that only produced two items: the widget and the jabberwock. On Dec. 31, 2007, I recorded a base value of 25 gp for the widget and 1,800 for the jabberwock. And let's say the skill is such that widgets are three times as important as jabberwocks in determining the value of the skill's output, so we give widgets a weight of 75 and jabberwocks a weight of 25.

Now, on a particular date, let's suppose that a widget is worth 20 gp and a jabberwock is worth 2,700. The value of this skill's index would be computed as follows:

Fictional "Hopscotching" Income Index = (20/25)*75+(2700/1800)*25 = 97.5

So in this case the index shows that the value of the output is down 2.5% from initial values. Notice that even though one item went down in value by 20% while the other went up by 50%, the overall index went down because the decreasing item has a much higher weight.

The index information that is computed from the current week's prices is used to calculate various secondary information that is also used in the report. This includes the following:

• Change Measurements: Next to each index's value is a figure that shows the percentage change in each index from the week before. Using the absolute value of the index along with the change number shows you how the index is faring overall and recently. For example, if an index shows "80.2 +1.7%", this means it is down 19.8% overall since the index began, but went up 1.7% from the value it had the previous week.
  
  The measurements are accompanied by arrows that indicate graphically up and down trends. A move up or down of 0-5% is shown with a single arrow; 5-10% by two arrows; 10-25% by three arrows; and more than 25% by four arrows.
  
  
• Graphs: A series of graphs allows you to see at a glance index trends over time, and how related indexes compare to each other.
  
  
• Winners and Losers: Each report contains a list of the ten items that went up the most ("winners") and down the most ("losers") in the preceding week, as well as a list of the top five increasing and decreasing individual indexes.

Other information may also be included, as necessary, to help explain and make sense of the results.

Understanding Yield, Income, Cost, Affordability and Composite Indexes TWIRP Limitations and Caveats