A numeric score that measures and tracks the characteristics and performance of the broader market or specific markets or asset classes. An indice (index) is constructed by a market player (e.g., exchanges, financial markets, etc.) and is typically market cap weighted, as the indice components are weighted according to the total market cap or market value of all the securities that are represented.
An indice can also be perceived as a tool designed to reflect the performance of a market or a subset of a market or sector. An indice indicates a change in published prices of a select collection of assets or securities. An example is an indice complied out of the prices of securities over time. Another interesting example is the so-called consumer price index (CPI), which is a published figure of general price level that reflects the change in prices paid by consumers for goods and services (usually a select basket of goods and services) over time.
A stock market indice is a list of securities whose prices are compiled according to a specific methodology in such a way as to represent the broader market in terms of general performance and direction, day to day and over time.
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