What are Stock Indices?
The stock indices correspond to a statistical record usually composed of a number, which tries to reflect the variations in value or average returns of the shares that comprise it. Generally, the actions that make up the stock index have common characteristics such as: belonging to the same stock market, having a similar market capitalization or belonging to the same industry. These are usually used as a benchmark for different portfolios, such as mutual funds. You can operate and trade on all stock indices. Some of the most used indices in trading, in addition to the DAX30, are:
It is a reference index of the Spanish stock market made up of the prices of the 35 most important companies in Spain, measured in terms of capitalization, regardless of the sector in which they operate. The Ibex-35 is renewed every six months, normally the same values remain, changes in the capitalization of one or another stock can lead to changes in the IBEX-35 and the financial markets.
The IBEX-35 index (Spanish Stock Market Index) is the reference index of the Spanish Stock Exchange. It is prepared by Bolsas y Mercados Españoles. The Ibex 35 is made up of the 35 most liquid companies listed on the SIBE (Electronic Stock Exchange Interconnection System) on the four existing Spanish Stock Exchanges (Madrid, Barcelona, Valencia and Bilbao).
Euro Stoxx 50
The Euro Stoxx 50 is one of the reference stock indices of the Eurozone stock market created on February 26, 1998. It is an index weighted by market capitalization, which means that not all the companies that comprise it have the same weight. The index has a wide coverage in terms of the diversity of industrial sectors, that is, it has a diversified portfolio (very important for the investor).
Currently, the index includes companies from eight countries that make up the Eurozone. These countries are: France, with a presence of 18 companies; Germany, with 13 companies in the index; Spain, with 6 companies; Italy and the Netherlands, with 5 companies each; and Belgium, Luxembourg and Ireland, with 1 company each.
France holds the leadership in qualitative terms with a relative weight of around 36% of the index. Germany stands with a weight around 32%. The Spanish participation in the index represents almost 12% of the total weight.
Nikkei is the most popular stock index in the Japanese market, is made up of the 225 most liquid securities listed on the Tokyo Stock Exchange. It is calculated by the Nihon Keizai Shinbun (Japanese Business Journal), from whose initials the name of the index comes. One of the details that we find with the Nikkei index is that it is the stock market with the most downward trend in all of history, being the historical maximum reached since December 29, 1989. The values of the Nikkei index are weighted by prices and not by compounding, although this calculation differs from a simple average in that the divisor is adjusted.
The largest participation in the Nikkei index is held by 66 industrial companies, 50 consumer discretionary companies and 24 financial companies. The list of its components is reviewed annually and changes are normally made effective in early October.
The Standard & Poor’s 500 index known as the S&P 500 is one of the most important stock market indices in the United States. To the S&P 500 is considered the most representative index of the real situation of the market. One of the reasons it is a true reflection of what is happening in the market: it omits the dividend effect.
The history of the S&P 500 introduced its first index in 1923, when Standard & Poor’s introduced an index covering 233 companies. It was from 1957 when the index added the 500 largest companies in the world.
This stock market index is made up of the 500 largest companies in the United States and is weighted according to the market capitalization of each of the companies. The S&P 500 is prepared by the stock and bond risk rating agency whose specialists have a reputation for being the most knowledgeable about the stock market and the risk situation of companies. It is one of the most popular indices when it comes to trading.
Among the different Dow Jones stock indices there are 4 main indices:
Dow Jones Industrial Average (DJIA): it is the most important of all and reflects the behavior of the share price of the 30 most important and representative industrial companies in the United States.
Dow Jones Utility Average (DJUA): where the securities of the 15 largest corporations in markets such as gas or electricity are reflected.
Dow Jones Transportation Average (DJTA): which includes the 20 largest transportation and distribution companies.
Dow Jones Composite Average (DJCA): is the index that measures the performance of the shares of 65 companies from the three previous indices. The companies that make up the Dow Jones Composite Average can vary depending on certain criteria, but most of them are large caps.
Sounds interesting to you, right? Keep learning trading with DTP with upcoming articles on our Blog.