Indices

An index is a "composite" measure of a particular market's or sector's performance. The value of an index represents the sum of all its constituent stocks and is calculated as a weighted average.

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

By geography, indices are divided into international, such as the MSCI World (including 6,000 global giants), the S&P Global 100 Index (respectively, 100 largest companies), and national, such as the Dow Jones Industrial Average, S&P 500, FTSE 100, Russian indices like RTS and MOEX.

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

• Simple arithmetic means market prices of shares included in the index are added up and the obtained sum is divided by the number of included shares. This is how the Dow Jones family indices are calculated;
• Weighted average is often calculated by capitalization. This method takes into account not only the price of shares but also the market share of the given issuer. The most famous example of such an index is the Standard & Poor's 500 (S&P 500).