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What is an Equity Index
An equity index, or stock market index, is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used to benchmark the performance of portfolios. The levels of certain indices are used as a method of assessing the status of a nation's stock market in general and as an indication of the nation's economic strength overall.
An index may be classified according to the method used to determine its price. In a Price-weighted index such as the Dow Jones Industrial Average, the price of each component stock is the only consideration when determining the value of the index. This means that price movements of even a single company's stock will heavily influence the value of the index, ignoring the relative size of the company as a whole. In contrast, a market-value weighted or capitalisation-weighted index, such as the Hang Seng Index, factors in the size of the company. Therefore, a relatively small shift in the price of a large company will more heavily influence the value of the index, compared with a similar price movement of a smaller company. |
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There are many equity indices throughout the modern world. The US has the Dow Jones Industrial Average, the S&P 500 and the NASDAQ, for the UK there is the FTSE 100 and for Japan we have the Nikkei. On PIPTRADE you can take positions on these indices as well as the German DAX and the Hang Seng from Hong Kong. |
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