index definition - ExpertGlossary

An index reports changes up or down, usually expressed as points and as a percentage, in a specific financial market, in a number of related markets, or in an economy as a whole.
Each index - and there are a large number of them - measures the market or economy it tracks from a specific starting point. That point might be as recent as the previous day or many years in the past.
For those reasons, indexes are often used as performance benchmarks against which to measure the return of investments that resemble those tracked by the index.
A market index may be calculated arithmetically or geometrically. That's one reason two indexes tracking similar markets may report different results. Further, some indexes are weighted and others are not.
Weighting means giving more significance to some elements in the index than to others. For example, a market capitalization weighted index is more influenced by price changes in the stock of its largest companies than by price changes in the stock of its smaller companies.

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Browse Related Terms: Arithmetic index, Domini Social Index 400, Floating shares, index fund, Indexed annuity, Morgan Stanley Capital International Indexes, Standard \& Poor\'s 500 Index (S\&P 500), Standard \& Poor\'s (S\&P), Standard \& Poor\'s/BARRA Growth and Value Indexes, Structured product, Total return index, Universe, Value Line Composite Index

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