Candlestick Trading Blog
April 14, 2009
Stock Market Index
| Also know as market indices, a stock market index tracks the performance of a specific group of stocks. This group of stocks represents a specific market sector of the United States stock market or the economy. There are indices for almost every single sector of the economy and the stock market and many investors are familiar with these indices through index funds and exchange traded funds. The purpose of these funds is to track a particular index's performance. Rather than try to determine the health of the market from the performance of a single stock, stock indexes allow investors to track a group of stocks. In today's article we discuss four popular market indices. Dow Jones Industrial Average (DJIA) – This marked the introduction of the stock market index by Charles H. Dow in May of 1986. The goal of this index was to take the average of twelve specific stocks in order to gauge the market's health. Of course now the calculation is a bit more complex, however it satisfies the same goal. This index is currently comprised on 30 blue chip stocks and the average share price of these stocks is divided by a number that is meant to reduce any distortions from non-essential factors. Unlike many other market indexes the DJIA is not a "weighted" index which means that it does not take into account market capitalization. Standard & Poor's 500 Index (S&P 500) – The S&P 500 is made up of 500 companies that reflect the largest corporations in America. These stocks are chosen for their market size (large cap stocks), their liquidity, and their industry. This market index was one of the first computerized indexes and each company is weighted according to the company's market value. The S&P 500 is a more accurate representation of actual market performance. Nasdaq-100 Index – The Nasdaq – 100 index is a modified capitalization weighted index that is used to track the performance of a market consisting of the 100 largest and most actively non-financial domestic and international securities listed on the Nasdaq stock market. In order to be included on this index, a stock must have a minimum average daily trading volume of 100,000 shares and have generally been listed on another major stock exchange for at least two years. Russell 2000 Index – This stock market index is a capitalization weighted index that is used to measure the performance of a market consisting of 2,000 of the smallest publicly traded companies in the United States. These 2,000 companies are determined by means of their market capitalization. These are other indexes in addition to those listed above. Continue to research these as well as other indexes when analyzing stock market indexes so that you have an overall knowledge of the markets. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
|
 |
|
 |
|
 |
|
 |
------------------------------------------------------------------- -
0 Comments:
Post a Comment
<< Blog Home