A stock-market index is a statistical measure of the daily change in a broad portfolio of stocks

Trading Stock-Market Indices

A stock-market index is a statistical measure of the daily change in a broad portfolio of stocks. The first index was introduced by Mr. Charles Dow in 1896. In any stock index, each stock represents a percentage weight (%) of the overall weighting (100%). The weight of each index is usually based on the market capitalization of each company listed. Stock indices are used as a general measure of a stock-market trend but they can be traded also as any other financial asset. Trading stock indices instead of trading individual stocks have proved particular profitable and that is why many mutual funds are imitating the composition of popular stock indices instead of making their own picks.

These are the most important stock-market indices in the world:

  • Dow Jones Industrial (US)

  • Nasdaq Composite (US)

  • S&P 500 (US)

  • NYSE (US)

  • Russell 2000 Index (US)

  • DAX 30 (Germany)

  • FTSE 100 (UK)

  • Nikkei (Japan)

  • Hang Seng (Hong Kong)

  • CAC 40 (France)

 

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average or Dow Jones includes 30 companies based in the US and it is considered the most important stock index in the world.

Official Dow-Jones WebSite | CME Group Web-Site

Table: DJIA Listed Companies (Weight over 5.0%)

 

Companies

(%)

1

IBM

10.99%

2

Chevron

6.34%

3

3M

5.69%

4

McDonalds

5.18%

5

Caterpillar

5.14%

 

Standard and Poor's Index (S&P 500)

The S&P 500 index is able to cover a broad area of the US economy as it contains the daily price changes of 500 listed companies. The 500 companies of S&P represent about 70% of the total US stock market value. The S&P 500 is weighted solely based on market capitalization. Note that the top 45 companies listed on S&P 500 today count more than 50% of the index’s total weight. The S&P 500 includes stocks from many different industries such is the financial, energy, the Internet, industrials, healthcare and consumer goods.

Nasdaq Composite Index

The Nasdaq Composite Index is an index specialized on technological stocks. The index was introduced in 1971 and today contains 4,000 stocks (technology, biotech, financial, consumer and industrial). The weight of each company listed on Nasdaq Composite is based on its market value. There is also the Nasdaq 100 index which includes 100 non-financial companies.

Nasdaq Web-Page

NYSE Tech 100 Index

The NYSE Arca Tech 100 Index is a price-weighted index comprised of common stocks and ADRs of technology-related companies listed on the US Exchanges.

The NYSE Arca Tech 100 Index is a price-weighted index comprised of common stocks and ADRs of technology-related companies listed on the US Exchanges.

NYSE Group

NYSE Euronext, Inc. was a Euro-American multinational financial services corporation that operated multiple securities exchanges, including the New York Stock Exchange, Euronext and NYSE Arca (formerly known as ArcaEx).

NYSE merged with Archipelago Holdings on March 7, 2006, forming NYSE Group, Inc. On April 4, 2007, NYSE Group, Inc. merged with Euronext N.V. to form the first global equities exchange, with its headquarters in Lower Manhattan. The components were then part of IntercontinentalExchange, although it has now spun off Euronext (Source: Wikipedia).

Website  ►NYX.com

The NYSE Arca Tech 100 Index

The NYSE Arca Tech 100 Index has a proven track record with a history going back to 1982 when it was launched by the Pacific Stock Exchange. The NYSE Arca Tech 100 index incorporates companies from several industries, including computer hardware, software, semiconductors, telecommunications, electronics, aerospace & defense, health care equipment, and biotechnology.

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