Question: What exactly is a stock index?

(Posted by: isaiahsullivan on 2010-01-23 18:10:01)

In its simplest form what is an index and how does it work?

Posted by: b2fnow on 2010-01-24, 23:40:53

The more pertinent question, if you don't know the other answers, is "What is it for? " It's a benchmark or proxy for the stock market, so you don't have to check every one of your stocks at lunchtime. If the DJIA or S &P is up more than half a percent, say 50 pts on the Dow and 5 points on the S &P, then most of your stocks are probably up for the day also. Very handy on your lunch hour or a quick peek at how the market is doing. You can find definitions for "What exactly is a stock index " here: investopedia.com/ terms/ i/ index.asp wordiq.com/ definition/ Stock_index

Posted by: trying to do good on 2010-01-23, 18:22:20

An index is a weighted average of the included stocks in the insex. Exaple the S &P 500 index is a number that reflects the stock price movement off the 500 biggest companies that are publicly traded on US exchanges.

Posted by: jeff410 on 2010-01-23, 18:39:41

An index is a statistical measure of change in a portion of the market. It is essentially a portfolio of securities constructed to represent a particular portion of the market. Each index has its own calculated differently and is usually expressed in terms of a change from a base value. So, the percentage change is more important than the actual number value. For example, knowing that a stock exchange is at, say, 5,000 doesn't tell you much. However, knowing that the index has risen 30% over the last year to 5,000 gives a much better demonstration of performance.