Indices Definition
An index is a statistical measure of change in a representative group of individual data points. These data points can be anything from prices to employment levels. An index allows analysts and economists to track economic activity and compare the relative performance of different groups over time.
The most commonly used indices are stock market indices, which track the performance of a basket of stocks representing a particular market or sector. Bond indices track the performance of a portfolio of bonds, and commodity indices track the price movements of a basket of commodities.
In general, an index is calculated by taking the arithmetic mean of a selection of data points. The index value is then tracked over time to see how it changes. When tracking an index, it is important to consider the weighting of the underlying data points. This is because some data points may have a greater impact on the overall index than others.
There are many different types of indices, but they all serve the same purpose: to give analysts and investors a quick snapshot of how a particular market or sector is performing.
