Stock Market Indices

Beginner

In this Master Academy educational video and article, we are looking at Stock Market Indices.

We will look here at:

  • What is a Stock Market Index?
  • What are the types of Indices?
  • How are they calculated?
  • Stock Market Index Examples

What is a Stock Market Index?

  • A Stock Market Index is a weighted average of a number of stocks, from a section of a Stock Market
  • A Stock Market Index is calculated from the price of the selected stocks, usually a weighted average
  • A Stock Market Index is supposed to reflect an entire Stock Market and track the entire market over time

What are the types of indices?

The index may reflect anything from a global overview of stocks or a country specific sector.

  • Global and World Indices e.g. MSCI World
  • Regional Indices e.g. S&P Asia 50
  • National Indices e.g. FTSE 100 (for the UK)
  • Sector Indices e.g. Banking

How are indices calculated?

There are two main ways of calculating a stock index

  • Price-Weighted
  • Capitalized-Weighted

Price-Weighted

The Price of a Stock is the determinant of the Weighting in the Index e.g. Dow Jones Industrial Average

Capitalized-Weighted
Factors in the Size of the Company, that is the Capitalization of the Stock e.g. S&P 500, FTSE 100

Examples of Stock Market Indices

European Stock Market Indices: FTSE 100, EURO STOXX 50, DAX

Weekly FTSE 100 Future

US Stock Market Indices: S&P 500, Dow Jones Industrial Average, Nasdaq 100

Weekly S&P 500

Asia Pacific Stock Market Indices: Nikkei 225, Hang Seng, ASX 200

Daily Nikkei

Steve Miley

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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