Tag: equity markets

How are stock Market Indices Valued

How are stock Market Indices Valued

Financial Markets Explained
Stock indices are financial markets made up of individual underlying stocks. While the stock indices are independent markets to themselves, the values are calculated based on the price of the individual stocks in the index. Examples of stock indices include, NASDAQ 100, S&P500, Nikkei, FTSE100, CAC40, IBEX and so on. Types of Stock Index Calculations Stock indices are usually calculated in two ways. Direct Index calculation and Indirect Index Calculation. A direct index calculation method, also known as a price-weighted index is based upon adding the individual stock prices. So if a stock index is made up of 5 individual stocks, then the direct index is made up by adding up the prices of the individual stocks. For example, DJIA. An indirect index calculation or market value wig...