what is stock indexes
Because every day on the stock exchanges are conducted operations with thousands of different shares, then the question arises about the system of indicators, characterizing the market as a whole. Such indicators have received the name "stock indices". what is stock indexes - this is a number that in a generalised form expresses the state of the particular group of shares. The change in the index over time provides an indication of the General direction of movement of the market, even in those cases when the prices of shares in the group changed differently. For the first time the term introduced Charles Dow, which belong to the idea and the first layout of the now world-known index 30 the largest industrial enterprises of the USA - the Dow Jones Industrial Average (DJIA).
what is stock indexes: Usually, the index is defined as the average of the values corresponding fall in the index of shares (they are called components of the index). For example, the S&P 500 is a weighted average of prices capitalization stocks of 500 leading us companies, divided by a fixed factor (divisor). Divisor is chosen so that at the time of the historical beginning of the calculation of the index (base date) its value was equal to any convenient number (base value). Giving the shares of different weights in the index is done in order to larger companies have more influence on the value of the index, but this is not compulsory.
The world stock market there are a large number of competing with each other indices are calculated exchanges, information and analytical agencies, business Newspapers and investment houses), each of which in one or another degree describes the selected sector of the market. The impact of a particular index on the market is determined by the fact, as far as he was popular among the investors. For the most influential indices are watching investors all over the world. For the dynamics of the Russian stock market can be monitored with the help of groups of indices of RTS and groups MICEX indices.
what is stock indexes: Another mechanism through which the index has impact on the market, is rebuilding. With time, the characteristics of the company, included in the index can be changed. Its capitalization may fall, it may acquire a company in another sector, finally, she may go bankrupt. On the other hand, it may happen so, that were not previously included in the index of the company suddenly become meet the criteria of the layout of the index. This leads to the fact that all of the most significant indices are reviewed regularly and in their structure to make the necessary changes. But in this special efforts are being taken to change the composition of the index does not resulted in a change of its value. There are special index funds, which lead portfolios on the basis of authoritative and popular indices. In this case, the exception of the company's shares from the index leads to a sharp fall in its price, as index funds to sell these shares, to change their portfolios in accordance with the new com
position of the index. And on the contrary, the shares included in the index of the company grow in the price. The occurrence in the most famous indexes - it is also a question of prestige and status of the company.
The authority and influence of the index are multiplied if, for him there is the derivative instrument, then there is a special exchange instrument, which the investor may buy or sell, as an ordinary share. Such indices are the S&P 100 (CBOE: OEX), the DJIA (AMEX: DIA), the S&P 500 (AMEX: SPY), NASDAQ_100 (AMEX: QQQ), etc. Futures on the S&P 500 (CBOE: SPX) is the most important market indicator: he is leading indicator in relation to all other indicators of the American stock market.
Relative analysis of the changes of indices shows in which direction to move money from any sector investors of their output and in which sectors of the economy guide. Therefore, the observation of the behavior of the index of interest of the industry can give to an investor for more information and advance to warn about the possible spread or the beginning of a new trend. Also on the indices made to compare the dynamics of particular shares. So, they say that the paper shows the results of the market, if its growth exceeds the growth of adequate her index or the fall - less than the fall of adequate index. And on the contrary, the action is behaving worse than the market, if its growth rate lower than the increase in its corresponding index or drop - exceeds the depth of the fall of the relevant her index.
