You must have heard such names as RTS, MICEX, Dow Jones (Dow Jones), NASDAQ (Nasdaq), etc. more than once. All these abbreviated names are nothing but popular stock indices various global platforms.
To make everything clear to you about what kind of indices they are and what they are “eaten with”, I decided to prepare this general educational material.
Let's start with general concept, what's happened market index is a calculated indicator reflecting the overall dynamics in a particular stock exchange. But indices can be calculated not only for the market as a whole, but also for its individual segments, i.e. by individual economic sectors or issuers that are involved in the market.
Indices exist not only stock, but also currency, for example, there are dollar, euro, etc. indices.
There are investors who not only from individual market instruments (for example: or forex instruments), but also invest separately in stock indices or trade on them independently.
Stock indices are calculated in several ways:
♦ as the arithmetic average percentage of the working portfolio.
Now, if you look at , you can see the average profitability percentages for one or another part of the portfolio, and despite the fact that some instruments may be in a big loss, overall result may have a positive impact. But, this method is not perfect, since the value of the assets on the market can be completely different. As a result, the stock index will have different values in percentage and monetary terms. Although, the American Dow Jones index has been calculated in this way for many years.
♦ as a geometric mean, but this is already a more complex calculation and here you need to remember the basics of mathematics and formulas.
♦ also, the above methods can be calculated not only by simple methods (they are also called unweighted), but also by weighted ones.
It is thanks to weighting (by the value of shares, by the value of the selected stock portfolio, by capitalization, etc.) that the stock index is calculated and it turns out that the index value becomes more balanced, since companies with large assets get more influence on the index than small and medium, respectively.
Stock indices are calculated so that in several figures it is possible to evaluate general situation in the market or in a particular area, it helps traders and investors to decide on the compilation of a portfolio or in conducting analytics for buying / selling securities.
What stock indices exist in the world:
In addition to the stock indices of individual countries and segments, there are also general world indices (most of them are American, so there are indices of the same name that also conduct calculations for the American market):
- MSCI World Capital Index, which was introduced by Morgan Stanley over 30 years ago. When calculating this index, securities of about twenty countries of the world are taken into account.
- The World Index, this index is calculated based on all world share prices, and is also divided into several parts by territorial segments (North America, Europe, Asia).
- Stock indices EMFI and EMI are indexes of new emerging markets of the world.
- Russell indexes. There are several of them: Russell 1000, Russell 2000, Russell 3000.
Frank Russell's company calculates them, and the numbers in the name of the index are not in vain. Russell 3000 is calculated based on the prices of 3000 shares of large American companies, Russell 2000 is 2000 of those 3000, but the smallest, and Russell 1000, on the contrary, is the largest.
- next world stock index Dow Jones Global Indexes. Its calculation is based on securities of about 30 countries and more than 2.5 thousand companies from all over the world. It is also divided into several sub-indices, which are considered in the euro area (Dow Jones EURO STOXX) and are divided according to different criteria, ranging from territorial (all of Europe), by success (blue chips, leaders of certain segments, etc.) and Dow Jones STOXX by similar criteria, but already all over the world.
- FTSE World Stock Indices (Efteesye). When calculating each of the indices, the most successful global companies with stable high liquidity in various industries are taken. For example, 50 selected in financial sector, 40 in banking, 30 in energy, etc., for a total of 11 FTSE indices.
- Another index that can be called popular is the Salomon Brothers SBWEI, as many of the indexes of companies around the world are considered to be.
And of course, this is not all world stock indices, there are others, but the majority of market experts are guided by the listed ones.
If we consider stock indices by individual countries, then there will also be a decent amount of them ...
Russian stock indices:
- MICEX Index (MICEX) - Moscow Interbank Stock Exchange. This main index is calculated based on the prices of transactions for the most liquid securities that are in circulation on this exchange.
Other indices are also calculated on the stock exchange, which are formed based on the segment (oil and gas, metallurgy, electric power industry, etc.) and the MICEX index 10, this is the arithmetic average of 10 liquid companies with the same “weight”.
- RTS Index (Russian Trading System). This index is calculated several times a day and can be called a general indicator of the Russian stock market.
- RBC Composite Index, this index is calculated by the RosBusinessConsulting agency and the result is summed up according to the geometric mean based on the data of the RTS, MICEX and MFB.
These were also popular stock indices, there are several others in Russia (RUX, RUIX, AK&M), but if you write about all of them in detail, then you will have to write a separate post for this topic.
America stock indices:
Some market indices of America are listed in the world section, but nevertheless there are a number of popular ones that are worth writing about, because stock exchanges were founded in America a long time ago, and, accordingly, indices, which are calculated using different methods.
- Again, it is worth remembering the Dow Jones family indices, in particular the Dow Jones 30, which is by far the most popular.
- The second most important and popular S & P 500, traders trading in the stock market are guided by its value. It is considered by companies listed on the New York Stock Exchange.
- The S&P 400 index, summed up with capitalization from data on 400 US industrial companies.
- S & P 100. Its calculation is based on a hundred stocks for which there are option contracts on the Chicago Stock Exchange.
- NASDAQ Composite (Nasdaq) weighted by capitalization and calculated from 3500 enterprises trading in the NASDAQ system. The current market value divided by the market value on the first day of the index.
- NASDAQ 100. This index is calculated in the same way as the Composite, but for 100 companies.
- AMEX index series:
1. AMEX Major Market Index is a stock index of "blue chips" traded on the New York Stock Exchange, usually serves as a benchmark for trading futures contracts.
2. AMEX Market Value Index, calculated including dividends. Weighted by capitalization of companies participating in trading on the American Stock Exchange.
- Wilshire 5000 is a general average index for many US stock exchanges.
Popular stock indices in Asia:
- Japanese Nikkei (Nikkei). This is Japan's main market index, calculated based on the prices of 225 "blue chips" of the Tokyo Stock Exchange.
- No less popular is the Japanese index TOPIX (Topiks), which includes data on all shares of the 1st echelon and it reveals the indicators of the entire stock market of the country to a greater extent.
- The Hang Seng Index, China's stock market index, is based on data from the Hong Kong Stock Exchange, 34 major companies participate in its calculation and is calculated by capitalization.
- SSE Composite, this is also the Chinese stock index, but it is calculated from the data Shanghai Exchange at the daily prices of all shares of the exchange.
- The average index of the Korean Exchange for all securities is called KOSPI.
Popular European stock indices:
- There are several indexes in the UK index lineup. The most popular and important one is FT-SE100, calculated as a weighted arithmetic indicator for 100 large companies in the UK, the data on it changes every minute.
- In Germany, the exchange benchmark is the DAX 30 index; for its calculations, data on the securities of the 30 most traded companies of the Frankfurt Stock Exchange are taken.
- In France, the calculation for the main stock index CAC40 is calculated in the same way as for the Dow Jones, the arithmetic average is calculated based on the data of 40 major companies of the Paris Stock Exchange.
There are stock exchanges in Europe in almost every country, respectively, and market indices too, but they are not particularly indicative in the world, so it makes little sense to list them, but other popular stock indices that are calculated in countries on other continents and about which many have heard, you can briefly discuss:
- The Brazilian Bovespa index, which is calculated using the main chips of the São Paulo stock exchange. Due to the unstable economy and inflation, this index "fell" dozens of times.
- AT developed country South Africa (South Africa) has its own FTSE / JSE Top40 index.
- The Canadian Toronto Stock Exchange has its own TSE300 stock index, which is considered among 14 sectors of the economy. Also S&P/TSX Composite Index, this is a general stock index.
- The continent-country Australia calculates its All Ordinaries Index stock index based on the shares of the Australian Exchange trading, and these are not only the country's shares, but also foreign ones.
Yes, there are many stock exchanges in the world, and there are even more indices, if you talk about all of them, you can even start a separate section in detail, because, as I said, today I made a selection of only the most popular ones, but there are still indices for new emerging markets and common ones among them etc. Everything is calculated in different ways, according to complex selections and formulas, so in fact you can study a lot about this for a long time ...
If you decide to connect your interests with studying and working on the stock market, then you need to study many of the indices regularly, listen to analytical forecasts and learn to navigate by their indicators.
Let's finish for today. See you!
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Stock indices are instruments that give an idea of the current state of the stock markets, in other words, they show the direction of the market. Often they are also called stock.
Stock indices are calculated based on a certain number of valuable papers. The number of stocks that affect the calculation of a particular stock index is usually indicated at the end of its name, for example, DAX 30, CAC 40, NASDAQ 100 and S & P 500. Thus, a change in the value of a stock index reflects the price dynamics of hundreds or dozens of stocks. And different stock indices of the same stock market allow you to evaluate it from different angles.
Key stock indices and their characteristics
Nowadays, there are more than two thousand different stock indices in circulation. But among them, it is worth highlighting some of the most popular - these are the FTSE 100, S&P's 500, RTS, NASDAQ, Nikkei, DAX, Dow Jones, MICEX indicators.
FTSE 100
This index characterizes the state of the UK stock market. The FTSE 100 is one of the most significant indicators in Europe. It is built on the basis of 100 liquid shares, which are listed on the LSE London Stock Exchange. Calculated since 1984.
Standard & Poor's 500
For its special significance, this indicator is often called a barometer. market value securities of 500 US corporations, which are listed on the two most important US stock exchanges - NYSE and NASDAQ.
Russian Trading System) is a stock exchange created in 1995 with the aim of establishing a centralized market for all Russian securities on the basis of the regional stock markets that operated at that time.
A number of PTC stock indices (RTC) include S&P/RUX-OIL, S&P/RUX, RTSI, Rux-Cbonds and RTST stock indices and are designed to assess the capitalization of large Russian companies.
The most popular in the NASDAQ family of stock indicators are the NASDAQ 100 stock indicators along with the NASDAQ Composite. which, together with AMEX and NYSE, belongs to the main US stock exchanges, appeared in early 1971 and is aimed at trading in securities of firms specializing in high technologies.
A number of stock indices of the Japanese Stock Exchange in Tokyo got its name because of the newspaper that has been publishing these main Japanese indices for several decades now: the Nikkei 500 indicator, the Nikkei 300 indicator, the Nikkei All Stock Index indicator.
The most popular in this family is the stock exchange indicator Nikkei 225, which shows the weighted average value of securities of 225 firms that are listed in the first section of the stock exchange in Tokyo.
This is the main stock indicator that appeared in 1988 and takes into account the value of 30 German companies that are leaders in various sectors of the economy: Deutsche Bank, Lufthansa, Commerzbank, Bayer AG, Allianz, Siemens, Deutsche Telekom, BASF and others.
Dow Jones (DJIA)
Probably, there is no person in the world who has not heard about this index. The Dow Jones was first used over a century ago. The number of companies whose shares were taken into account for the value of this exchange indicator changed several times over time. At the beginning, in 1896, there were 13, in 1916 - 25, and from 1928 to the present day, the Dow Jones index has been consistently based on the share price of 30 companies. In fact, it is equal to the arithmetic average value of the securities of these largest American corporations.
In addition to the main one, the values of the Dow Jones stock indices are also calculated for certain sectors of the economy: the transport indicator DJ (based on the value of securities of 20 industry giants), the communal indicator DJ (based on the value of securities of 15 companies), as well as a composite index based on the value of 65 shares, and a number of other stock indices.
MICEX
It is a composite index of the Moscow Exchange of the same name, which takes into account the price of the most liquid securities Russian companies. The initial value of this indicator was calculated for the end of 1997 and taken as 100. The price of the ten most liquid shares is taken into account for the determination.
We often hear that the stock exchanges opened with a few percent increase in indices. Or vice versa, the index fell by 50 points. The MICEX index for the year rose by 24%? And the RTS index for the same time fell by 2 times. What do all these words mean? How to understand whether the economy is growing or falling. What is the investment climate in the country. In this article, we will analyze what stock indices are, what they mean and where and for what they are used.
The history of the origin of indices
The very first index was invented by Edward Jones and Charles Dow. It included 12 of the most largest enterprises U.S.A. The index was calculated quite simply: the arithmetic mean of the composition of its constituent companies. And although since then the parameters for determining this index have undergone many changes, as well as the number of companies included in it, this moment it remains one of the most popular in the world. You must have heard about him... Dow Jones index.
What are stock indices
Let's imagine a picture. Hundreds, thousands, tens of thousands of shares are traded on the stock market various companies. And every day some of them are growing, others are falling, and still others are trampling around in a certain range. And how to determine the overall dynamics of the market? This is what stock indices are used for.
The essence of the index is as follows: companies included in the index are selected on a certain basis and a certain value is displayed on the basis of certain calculations. This value or index value itself does not give absolutely no information. The benefit of using indexes is to change its values, which is taken either as a percentage or in points.
It is by the dynamics of changes in indices that one can judge whether the market is growing or falling. Those. if the index rises, then the shares of most of the companies included in it rise, or at least those companies whose share in the index is large enough to pull the index in their direction grow.
Let's say in the MICEX index - share 4 largest companies(Gazprom, Sberbank, Magnit and Lukoil) - is approximately 30%.
Indices can be used to measure various market parameters. There are industry indices, which include only companies belonging to the same industry, for example, financial sector, engineering, energy, etc. There are indexes, which include only the largest companies.
How stock indices are calculated
The basis for calculating stock indices may include various mechanisms. Initially, it was just the arithmetic mean. But such a calculation did not give an accurate idea of the movement of the market. All companies differ from each other in terms of capitalization, and each of them should influence the country's economy in different ways. Therefore, at the moment, other methods of forming indices are used: (simple and weighted average, arithmetic and geometric average, and others). Each index has its own calculation mechanism.
Calculation of indicators of stock indices is carried out either rating agencies or exchange agencies. The name of the index mainly consists of an abbreviation and sometimes a number indicating the number of companies included in this index.
The most popular stock indices in the world
Dow Jones- Dow Jones industrial index. Probably the most popular index in the world. The structure includes 30 largest US companies from various industries: finance, transportation, consumer, food and industrial sectors. The index includes world famous companies: Coca-Cola, IBM, Intel, MicroSoft, General Motors and others.
S&P 500— an index that includes the 500 largest US companies by capitalization. Therefore, by the index itself, one can judge how things are in the country's economy, since it affects all the main sectors of the country.
Nikkei 225- Japanese index, which includes 225 companies. The composition is reviewed annually. It includes such giants as Honda, Panasonic, Mazda and others. With a 99.9% chance, all Japanese brands that you know are included in the NIKKEI 225. Like the S&P 500, it reflects the state of the economy quite objectively. The most important index in the Asian region.
DAX- the German stock index, which includes the 30 most important companies in the country: Adidas, BMW, Henkel, Volkswagen and others.
FTSE 100 is the most respected and quoted index on European exchanges. As part of the 100 largest companies traded on the London Stock Exchange.
CAC 40- French stock index, which includes 40 largest companies traded on the Paris Stock Exchange: Renault, L'Oreal.
MICEX and RTS— 2 stock indices, which include 50 of the most liquid and largest companies in Russia. The index includes such giants as Gazprom, Rosneft, Lukoil, Sberbank, Magnit, etc.
The calculation mechanism for Russian indices is absolutely the same. The difference is that the MICEX is settled in rubles, while the RTS is settled in dollars.
Exchange indices (or stock indices) are some indicator by which the current state of affairs in the stock market is determined. In turn, this means that this market is influenced by individual variables that indicate the value of those shares and bonds that are the most liquid.
In practice, the value of a certain group of securities, which are combined according to a certain attribute, has a tendency to constant changes, which depend on several different factors. To get a complete picture in understanding such price changes, stock indices were created that allow you to track changes in the value of a certain group of certain stocks and bonds under the influence of various factors.
Thus, studying the dynamics of this market is necessary to obtain complete information about the current state of the stock market as a whole, which, in turn, allows for short-term and long-term forecasting, which is necessary for successful trading.
Types of stock indices
Currently, one of the most important and very first of its kind indexes is the Dow Jones index. This index is over 100 years old, and it is a fundamental indicator in the modern stock market.
Charles Dow at one time observed the trend of changes that occurred with stock prices in the ten largest American transport companies. To do this, he combined them by industry, as a result of which he was able to determine the overall dynamics and find the relationship between variables.
Undoubtedly, modern stock indices are somewhat different, however, they have some common features with their predecessors, namely, the basics of Charles Dow's developments. The second indicator after the appearance of the Dow index was developed thirty years later. This indicator is an index with a fairly popular name today - S&P 500.
Quite a long time has passed since that moment.
time, and today there are several different stock indexes. All of them are divided into classes according to certain characteristics. Thus, indices can be divided by regions and be:
- Russian,
- Central Asian
- american,
- Western European.
In addition, the indices are also classified in accordance with the calculation method: - - arithmetic mean,
- arithmetic mean weighted,
- geometric mean.
Variables can also be separated by constituent companies that have rights to them. According to this characteristic, they are divided into:
- agency;
- brokerage;
- created by the stock market.
Currently, the main stock indices in Russia are represented by six categories. These are the ones most commonly used in the stock market today. Despite the fact that this number of variables on a global scale is relatively small, all the same, they are quite enough to make successful transactions.
Among traders post-Soviet space the most popular are stock RTS indices, which determine the change in the value of securities in dollar terms. Those. their size is affected interbank rate currencies, which affects their popularity during inflation during the rapid fall of the ruble denomination.
The MICEX stock indices are famous for their relative stability. Their main difference from the previous variables is that their calculation takes place in national currency and is represented by two subspecies:
- the net MICEX index, which reflects the change in prices for three dozen of the most liquid stocks on the domestic market;
- the MICEX 10 index, showing the simple value of the share prices of one of the ten most liquid indicators.
In addition, the main stock indices, which are also the most popular, include the following:
- MICEX RGBI, which operates in the public sector;
- MICEX MBI, municipal level index;
- MICEX CBI, corporate index.
It is worth saying that all these three indicators are included in the MICEX system.
On the international market, there is a huge number of various stock indices, and therefore, it is most convenient to classify them according to a geographical feature. It also allows you to highlight the most popular and significant of them.
Thus, on American market The highest position among all indices belongs to the Dow Jones index. It is an indicator of the change in the value of shares of more than 500 of the most famous American companies. Its determination is based on the weighted cost method.
In the Western European market, the leading position is occupied by the FT-SE index. Despite the fact that it has not so many companies (about 30), all the same, its definition is based on a complex geometric technique.
In the Asia-Pacific segment, this index is represented by two leading indicators:
- The Nikkey Index, which includes over 200 companies.
- Hong Kong, which displays the change in prices for securities in the Chinese market. It includes about thirty companies.
Calculation of stock indices
Stock indices are calculated using several methods. The main one is the simplest technique based on the calculation of the arithmetic mean. In this case, the numerator is the total value of the shares at a certain reporting moment, and the denominator is the new value of the securities. Despite the popularity and simplicity this method, it is imperfect, since shares with a lower nominal rate cannot fully influence more expensive ones, and vice versa.
There is another method that is considered more accurate than the previous one. It consists in calculating the arithmetic weighted average. To do this, each share receives a certain coefficient, which depends on its quantitative share in the stock market. Further, this coefficient is multiplied by its cost with each change.
The last method is to find the geometric mean, which depends on the rate of growth or fall in securities prices.
Exchange indices of currencies allow you to form an idea of the general picture of the state of affairs in a particular market, thanks to which the entrepreneur receives the necessary information in order to decide whether or not to invest in this niche of the world market. In this regard, absolutely every indicator of all indices existing on the world market today is useful. All that is needed is to know which industry is represented by this index and which business cases of companies affect its changes.
