How stock indices work

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Benzinga  54 min ago  Comment 
September SP500 is trading at 2190.50, up 10.25. September Nasdaq 100 is trading at 4833.25, up 29.00 September Russell 2000 is trading at 1240.20, up 13.00. September Dow Industrial futures are trading at 18615, up 92. Stock index...
Motley Fool  Aug 12  Comment 
Why NVIDIA and Nordstrom jumped as indexes declined on Friday.
Benzinga  Aug 12  Comment 
September SP500 is trading at 2178.75, down 3.00. September Nasdaq 100 is trading at 4795.00, down 5.0 September Russell 2000 is trading at 1224.00, down 3.30. September Dow Industrial futures are trading at 18515, down 50. Stock index...
Benzinga  Aug 11  Comment 
September SP500 is trading at 2181.50, up 8.75. September Nasdaq 100 is trading at 4800.25, up 18.75. September Russell 2000 is trading at 1225.00, up 3.70. September Dow Industrial futures are trading at 18559, up 107. Stock index...
Benzinga  Aug 10  Comment 
September SP500 is trading at 2169.50, down 8.00. September Nasdaq 100 is trading at 4773.50, down 18.25. September Russell 2000 is trading at 1220.50, down 9.40. September Dow Industrial futures are trading at 18430, down 36. Stock...
The Hindu Business Line  Aug 10  Comment 
Weights of stocks such as Axis Bank, YES Bank, BPCL and Eicher Motors are likely to increase during Thursday’s tweaking of the MSCI India index, a widely tracked emerging market index by global fund...
Motley Fool  Aug 9  Comment 
Rackspace Hosting and Wayfair stocks made big moves, even as indexes ran in place on Tuesday.
Benzinga  Aug 9  Comment 
September SP500 is trading at 2182.00, up 6.50. September Nasdaq 100 is trading at 4803.75, up 24.50. September Russell 2000 is trading at 1231.00, up 3.80. September Dow Industrial futures are trading at 18511, up 51. Stock index...
Motley Fool  Aug 8  Comment 
Mattress Firm was a big winner on Monday, while Dean Foods' stock slumped following its quarterly earnings announcement.
Benzinga  Aug 8  Comment 
September SP500 is trading at 2175.75, down 1.00. September Nasdaq 100 is trading at 4774.00, down 9.00. September Russell 2000 is trading at 1229.10, up 0.70. September Dow Industrial futures are trading at 18453, down 1. Stock...




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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.


References

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

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