How Stock Indices Work

Benzinga  3 hrs ago  Comment 
March SP500 is trading at 2360.25, up 0.25 March Nasdaq 100 is trading at 5347.75, up 4.00. March Russell 2000 is trading at 1403.7, down 3.50 March Dow Industrial futures are trading at 20727, up 39. Stock index futures are trading on...
The Economic Times  Feb 22  Comment 
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 per cent, taking its cues from the world stock index rising to an all-time peak overnight.
Benzinga  Feb 21  Comment 
March SP500 is trading at 2359.00, up 11.00 March Nasdaq 100 is trading at 5339.50, up 14.00. March Russell 2000 is trading at 1404.70, up 7.10 March Dow Industrial futures are trading at 20694, up 106 Stock index futures a trading...
Motley Fool  Feb 20  Comment 
By one estimate, the current ratio of stock prices to corporate earnings has been higher only twice since the year 1900 -- in 1929 and 2000.
The Economic Times  Feb 20  Comment 
The monthly Index declined marginally to 49.2 in February 2017 from 50.9 in Jan 2017 which means that IIP growth may continue to contract in Jan and Feb 2017.
Benzinga  Feb 17  Comment 
March SP500 is trading at 2342.00, down 3.50 March Nasdaq 100 is trading at 5309.75, up 9.25. March Russell 2000 is trading at 1395.10, down 3.90 March Dow Industrial futures are trading at 20541, down 53. Stock index futures have moved...
Insurance Journal  Feb 17  Comment 
Global insurance rate decreases moderated on average for the fourth consecutive quarter, down 3.1 percent (compared to the previous quarter’s decrease of 3.2 percent), according to Marsh’s Global Insurance Market Index – Q4 2016. * “The...
The Economic Times  Feb 17  Comment 
Emerging markets have lost some sheen since his victory, with MSCI EM index up just 4.4% compared to the MSCI Developed Market Index's rise of 8.4%.
Benzinga  Feb 16  Comment 
After posting eight consecutive weeks of gains, the Viridian Cannabis Stock Index, which groups a majority of the most relevant securities in the marijuana space, experienced a reversal last week. For the five days comprised between February 6...
Benzinga  Feb 16  Comment 
March SP500 is trading at 2341.25, down 9.25. March Nasdaq 100 is trading at 5297.75, down 12.50. March Russell 2000 is trading at 1392.60, down 12.80 March Dow Industrial futures are trading at 20570, down 53. Stock index futures are...


A stock index is generally a portfolio of stocks, bonds or other kinds of investments which are used to represent either segments of an exchange or the whole exchange. One of the most common ways to understand a stock index is to have a look at the composition of the stocks it represents. Generally, the set of rules require the stocks to satisfy certain criteria, such that[1]:

  • All the investments in the index are subject to selection.
  • Includes calculations and rules for weighting of the index components.
  • Provides specific instructions for adjustments to maintain consistency.

How Stock Market Indexes are classified

The benchmark indices of various exchanges not only represent the stocks, but the scenario of the market as a whole. Hence, they are used to depict the overall health of the economy as well. Understanding how the index works, is a good way to begin analysis on various stocks and their importance to the economy. A good way to analyze an index is to understand the composition of the stocks it represents.

A broad based index or composite index is the one which covers almost all stocks on the exchange (or a certain majority percentage of the market capitalization on the exchange). The main purpose of the broad based index is to act as a proxy for the performance of the economic conditions of the entire market, or reveal investor sentiment towards the market.

Based on the definition of a stock index, a global index could include indices which span across exchanges and possibly countries. The Dow Jones Wilshire 5000 Total Stock Market Index spans all publicly traded index in America, excluding foreign stocks and ADRs. The Euronext 100 includes stocks from all over the European Union and the Russell Investment group have something called the Global Index.


<Broby, D., "Equity Index Construction", The Journal of Index Investing, Fall 2011, Vol. 2, No. 2: pp. 36-39 />

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