A statistical composite and method of measuring changes in the prices (and performance) of securities (e.g., stocks, bonds, etc.) and other assets (e.g., commodities, contracts, etc.) over time (as per pre-defined time units or instantly). An index reflects the movement, up and down, of a security, in reaction to changing market fundamentals and the amount of securities outstanding for the companies that are part of the index.
A stock index is a collection of shares (the index constituents) that are compiled together to give an indication of the overall performance or trajectory of a sector, exchange or economy. Usually, a stock index consists of a number of the best indicative (top) shares from a given exchange. A stock index reflects the changes in the market based on the performance of the stocks belonging to companies from the same sector or multiple sectors. It measures and represents the difference between current and past stock prices, all in relation to a base date or period, in order to allow investors and other market participants to get a picture about the current trend in the market.
Examples of well-known indices are the Dow Jones Averages, the New York Stock Exchanges Composite Index, the Russell 2000 Index, etc.
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