Stock market indexes are tools that measure certain portions of the stock market. Many stock market indexes are used by financial reporting agencies to mark the performance of different stock portfolios. Stock market indexes are useful because they measure a group of similar stocks instead of focusing on just one stock at a time. Through this measurement, a stock index can provide information about an entire market or segment of a market instead of a single stock alone.
There are quite a few ways to classify stock indexes. “Global” or “world” stock indexes typically include larger companies regardless of where they are headquartered or traded. For instance, the S&P Global 100 and MSCI World track stocks without basing the data on a company’s operational region.
Major Stock Indexes
Perhaps the largest and most known stock index is The Dow Jones Industrial Average, and it is made up of the top 30 companies in the United States. Analysts in the United States watch the Dow the closest because it monitors highly targeted activity in the stock market on a minute-by-minute basis. The Dow was originally created as a stock index for gauging stocks in the industrial sector of the United States economy, but as it increased in popularity, it began to take factors besides economic and corporate statistics into consideration when weighting stocks. Now, foreign and domestic issues, world events, and natural disasters play a heavy role in the Dow’s numbers as well.
Another major stock index, the Dow Jones Wilshire 5000 Total Market Index, keeps track of almost every stock in the United States that is available for public trade. Known as the Wilshire 5000 for short, this well-known stock index is weighted by capitalization of the market value for just about every stock that is traded in America. The Wilshire 5000 measures how publicly traded companies in the United States are doing, and it offers up-to-the-minute price information for traders. It also includes most of the stocks being traded through the NASDAQ, the American Stock Exchange, and the New York Stock Exchange.
Other Stock Indexes
There are also smaller stock indexes that can offer all kinds of different information based upon the system used to classify stocks. The Morgan Stanley Biotech Index, for example, is a smaller index. It measures stocks in the biotechnology industry specifically. Many other industry-specific stock indexes can give a good indication of activity within a certain sector of the economy as well.