Indices

What are the indices?

Indices are "composite" measures of the performance of a particular market or sector of the economy. The value of an index represents the total value of all the stocks it includes and is calculated as a weighted average.

Indices allow you to make trades not just on the shares of an individual company, but to join the rise or fall of an entire industry (IT, engineering, etc.).

According to the calculation methodology, indices are divided into groups, the most common of which are as follows:

• simple arithmetic average - market prices of the stocks included in the index are added up and the resulting sum is divided by the number of included stocks. The Dow Jones family indices are calculated like that;
• weighted average - as a rule, by capitalization. Thus, it is possible to take into account not only the price of shares, but also the share of securities of a given issuer on the market. The most famous example of such an index is Standard & Poor's 500 (S&P 500).

By geography indices are divided into international, such as MSCI World (including 6 thousand world companies), S&P Global 100 Index (respectively, 100 largest companies), and national, such as Dow Jones Industrial Average, S&P 500, FTSE 100, Russian indices RTS and MICEX.