Stock Market Indexes

Indexes

Indexes are useful in assessing investment results. They provide a benchmark against which performance can be compared. They also useful in financial research, through which an investigator seeks to discover the relationship between certain economic variables and market results. In fact, most of us keep abreast of developments in “the market” by watching the indexes.
Most popular indexes

Stock Indexes:

Probably no one knows precisely how many different stock indexes exist at any given time even considering just those indexes in the United States. Globally, the chore of maintaining an accurate accounting of each index is probably impossible. Now measures are continually being added and some are deleted as more effective ones come about.

1. Dow Jones Averages:

To the general public, the Dow Jones averages are probably the most familiar stock market indictors. The four primary averages are the industrial average the transportation average, the utilities average, and the Dow Jones composite.
Dow Jones & Company introduced the Dow Jones Industrial Average in 1896. Initially the index was based on the value of 12 companies. The first value of the average was 40.94 on May 26, 1896.

2. Standard & Poor’s Indexes:

Not surprisingly, the Standard & Poor’s Corporation also prepares and publishes a large number of indexes. The calculation method for all S&P indexes is identical. The S&P 500 Composite is probably the most widely used. This value-weighted index contains 500 NYSE-traded securities. Standard & Poor’s describes it as “an index of leading companies in leading industries.” It is not, however, the 500 largest U.S stocks, although many people erroneously believe so.

It is important to recognize that just because there are 500 stocks in the S&P 500 index this does not mean that the index cannot be swayed by individual stock performance.