Stock Market Indices

Beginner

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

In this article we will look 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

Read more about the stock market and other financial markets here.

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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