How stock indices work

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Yahoo  Dec 17  Comment 
Benchmark U.S. stock index rallies, in anticipation of fiscal stimulus measures by the incoming administration of President-elect Donald Trump, could also be laying the seeds for equity market troubles from a stronger dollar and rising bond...
Reuters  Dec 16  Comment 
Benchmark U.S. stock index rallies, in anticipation of fiscal stimulus measures by the incoming administration of President-elect Donald Trump, could also be laying the seeds for equity market troubles from a stronger dollar and rising bond yields.
Benzinga  Dec 16  Comment 
March SP500 is trading at 2252.50, down 5.50 March Nasdaq 100 is trading at 4915.25, down 19.50 March Russell 2000 is trading at 1368.40, down 0.80. March Dow Industrial futures are trading at 19783, down 20. Stock index futures are...
Benzinga  Dec 15  Comment 
March SP500 is trading at 2260.75, up 8.75 March Nasdaq 100 is trading at 4950.50, up 18.00 March Russell 2000 is trading at 1370.20, up 12.50. March Dow Industrial futures are trading at 19839, up 74. Stock index futures are rangebound...
Benzinga  Dec 15  Comment 
Viridian Capital Advisors is one of the world’s top financial and strategic advisory firms in the cannabis industry. Benzinga recently had a conversation with the company’s founder and president Scott Greiper and one of its analysts, Harrison...
Benzinga  Dec 14  Comment 
March SP500 is trading at 2244.00, down 23.75 March Nasdaq 100 is trading at 4914.00, down 23.00 March Russell 2000 is trading at 1353.10, down 21.60. March Dow Industrial futures are trading at 19704, down 155. Stock index futures are...
The Economic Times  Dec 14  Comment 
Rita Teaotia also launched a mobile app put together by EEPC India which contains information about various initiatives, policies, events and market index prices.
Benzinga  Dec 13  Comment 
March SP500 is trading at 2268.25, up 17.50 March Nasdaq 100 is trading at 4948.25, up 82.00 March Russell 2000 is trading at 1377.80, up 5.00. March Dow Industrial futures are trading at 19858, up 136. Most stock index futures are...
Benzinga  Dec 12  Comment 
March SP500 is trading at 2247.25, down 7.50 March Nasdaq 100 is trading at 4853.50, down 40.00 March Russell 2000 is trading at 1369.7, down 16.90. March Dow Industrial futures are trading at 19703, down 08. Stock index futures are...
Benzinga  Dec 12  Comment 
Benzinga  Dec 9  Comment 
March SP500 is trading at 2248.50, up 4.25 March Nasdaq 100 is trading at 4889.00, up 26.75 March Russell 2000 is trading at 1384.5, down 2.4. March Dow Industrial futures are trading at 19615, up 51. Stock index futures are trading...




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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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