# Let's get to know more about the index. And the forms for calculating the general stock index.

Let's get to know more about the index. And the forms for calculating the general stock index.
3/23/2023
Pannipa

You may have heard of the NASDAQ 100, Nikkei 225 and Dow Jones stock indices during the morning and evening economic news of the day. You might wonder What is a stock index? How is it important? How can you benefit from these indices? This article has the answer for you.

💥What is a stock index?💥

Index (Index) is a measure resulting from statistical calculations. To track changes in what you want to measure or as indicators of various interesting situations such as manufacturing sector index, employment index, service sector index, etc.

Stock Index is a number that reflects the price movement of the underlying stock, such as the SET High Dividend 30 Index that reflects the price of 30 companies with high market value. High liquidity and high dividends.

The key criteria for stock indices are: Investable and transparent There are mutual funds that are linked to various indexes such as the SET50 and SET100, which are called index funds. Where the difference between the performance of the index fund and the underlying index is called the Tracking Error value.

The lower the tracking error value, the more efficiently the index fund replicates the underlying index than the higher tracking error index fund.

💥How to calculate stock index💥

We can divide the stock index calculation into 3 forms.

👉 Market capitalization-weighted stock indices (Capitalization-weighted Index) is a large stock with a high market cap (market value) has a high influence on the index's dynamics. For example, the S&P 500 (US) and FTSE 100 (UK).

☆ For example, Index A has 100 shares of A at 4 \$ and 200 shares of B at 5 \$.

Market Cap is calculated from share price x total number of shares.

Stock A = 4*100 = 400
Stock B = 5*200 = 1,000
Total Market Cap of Index A is 400+1,000 = 1,400

The ratio of Stocks A and B to Index A by market capitalization is calculated as the share's market cap divided by the total market cap of the index. then multiply by 100.

Stock A = (400/1,400) x 100 = 28.57%
Stock B = (1,000/1,400) x 100 = 71.43%
Stock B has a higher percentage than Stock A in Index A.

👉 Market-weighted stock indices (Price-weighted Index) is that high-priced stocks trading have a greater proportion than low-priced stocks trading, for example, Dow Jones (USA) and Nikkei 225 (Japan).

☆ Example Index A has stock A price 5 \$, stock B price 10 \$ and stock C price 15 \$.

Stock A = [5/(5+10+15)] x 100 = 16.67%
Stock B = [10/(5+10+15)] x 100 = 33.33%
Stock C = [15/(5+10+15)] x 100 = 50.00%
Stock C has the largest share in Index A, followed by Stock B and Stock A.

👉 Equal Weighted Stock Indices (Equal-weighted Index) Simply put, every stock has the same proportion. Which diversifies risk better than market capitalization-weighted stock indices But such an index can change more quickly and suddenly.

You can also calculate stock indices of your particular interest from the available platforms and websites. You can visit how to builders indexes yourself using Hydra here.

💥The Top Popular Index💥

⚡️The S&P 500 (Standard & Poor's 500) is a market capitalization-weighted stock index. It measures the performance of 500 companies listed on the US stock exchange. The S&P 500 is one of the most traded indices and one of the performance indicators of the US stock market. And the state of the US economy as a whole. Examples of companies in the S&P 500 include Apple, Microsoft, Amazon, Berkshire Hathaway, Visa, etc.

⚡️ Dow Jones or Dow Jones Industrial Index is a market weighted stock index. It measures the performance of stocks of 30 large companies listed on the US stock exchange such as Microsoft, Coca Cola, Apple, McDonald, etc. The Dow Jones Index is produced by S&P Dow Jones Indices.

⚡️ NASDAQ 100 First published on January 31, 1985, the NASDAQ 100 (NDX) is a stock index of 100 large companies. (not a finance company) listed on the NASDAQ Stock Exchange It consists of the 100 largest domestic and international non-financial companies listed on the NASDAQ Stock Exchange by market capitalization. ), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG, GOOGL).

⚡️ Nikkei 225 is a daily index measuring the performance of 225 leading Japanese companies listed on the Tokyo Stock Exchange by the Nikkei newspaper since September 7, 1950, 70 years ago. An important temple indicating the condition of the Japanese stock market. It also represents the economic outlook of Japan from after World War II to the present.

⚡️ FTSE 100 is a stock index of 100 companies listed on the London Stock Exchange with the highest market capitalization. With the company's shares in the FTSE 100 index representing 81% of the total market capitalization of the London Stock Exchange. The FTSE 100 Index is produced by the FTSE Group, a subsidiary of the London Stock Exchange. Examples of companies in the FTSE 100 index are Tesco, Unilever, Barclays, etc.

⚡️The DAX 30 is a market capitalization-weighted stock index of 30 German blue chip companies listed on the Frankfurt Stock Exchange, which is equivalent to the US Dow Jones Index. It fully reflects the real picture of the German economy. The DAX 30 index was first published on July 1, 1988. Examples of companies in the DAX 30 index are BMW, Adidas, Bayer, Deutsch Bank, etc.

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