stock index (stock index, bond index) - index, calculated on a representative set of securities traded on the market (Shares, bonds) in order to assess the level and general direction of movement of their value.
Stock index - indicator, calculated on a representative set of securities, listed on the stock exchange.
A short list of the most famous US stock indices:
- Index Dow Jones Industrial Average (DJIA) – calculated based on prices 30 companies “blue chips”.
- Index Standard & Poor’s 500 (S&P 500) – reflects share prices 500 largest companies.
- Index NYSE Composite Index – includes all common shares, traded on the NYSE, is the main indicator, reflecting the situation on the stock exchange. It is also complemented by various indices of individual industries..
- Index Nasdaq Composite – includes all companies, traded on Nasdaq.
- Top 100 NASDAQ Issuers, excluding financial companies, объединена в индекс Nasdaq-100.
- Index Wilshire 5000 – American Stock Exchange AMEX index.
- Index Fortune 500- Fortune magazine index.
- Индексы семейства Russell.
The main characteristics of the index are:
- index list,
- averaging method,
- type of weighting factors,
- base value,
- statistical base.
When drawing up, for example, stock index list preference is given to stocks, price behavior which best reflects the state of the given sector of the economy.
Usually the index is expressed as a number; can be dimensionless or measured in monetary units.
Stock indices are calculated according to the following main methods:
- Price weighted (price weighting)- reflects the average price of a security, in the index list.
- Market Weighing (market value weighting)- reflects the change in the total market value of a security, in the index list.
- Equal Weighing (equal weighting)- reflects, depending on the method of calculation, arithmetic mean or geometric mean of relative changes in the market value of assets, included in the index list.
The calculation of the last two indices includes normalization in relation to the base value in a certain period of time and multiplication by the index value adopted for this period of time.
- Промышленный индекс Dow Jones Industrial Average
Dow Jones industrial index (English. Dow Jones Industrial Average, DJIA) - one of several stock indices, created by the editor of the Wall Street Journal and the founder of Dow Jones & Company by Charles Doe (Charles Dow). The idea to create a stock price index came from Dow at the stage of publishing "Letters after Noon". He thought, that reading his table, which included an increasing number of shares, only confuses the reader, without giving him accurate information about the movement of the market. This is how the idea arose of bringing stock prices to the average value - the stock market index. The first Dow was published 3 July 1884 of the year. It included nine railway, one steamship and one postal company (Western Union). Why the choice fell on them? It's that simple: transport companies, according to Dow, were the locomotive of the American economy of that period. He understood, that business will not develop there, where there are no railways, where mail does not reach and there is no sea communication. Since the index includes most of the railway companies, it got the name Dow Jones Railroad Average (DJRA). The transport index was calculated simply: as the arithmetic mean of all stocks included in it. For example, 3 July 1884 of the year the DJRA index was 69,93 item: total value of shares of transport companies (769,23 item), divided by the number of companies (11). Dow later created another index of utility companies. (Dow Jones Utility Average).
But the most famous was the Dow Jones Industrial Average. (Dow Jones Industrial Average, DJIA). The index was first published 26 May 1896 of the year. At that time, the index was the arithmetic average of stock prices 12 American industrial companies. The first published index value was 40,94. IN 1916 year the number of companies was increased to 20, and in 1928 - to 30. 14-th November 1972 of the year the index for the first time crossed the mark 1000 points (1003,16). The industrial index is calculated as the arithmetic average unweighted stock price 30 largest companies. The divisor is not a number 30 companies, and a certain coefficient, taking into account multiple splitting up Capital (split) issuers with 1928 at the time of the Dow Jones index calculation in 1928 the divisor was 30, and then there was a constant decline. For instance, in 2006 year he equaled 0,12493117.
From 12 companies only General Electric (GE) presented in today's version of the index. Other 11 or were renamed after mergers and acquisitions, either ceased to exist.
The remaining 11 companies were:
- American Cotton Oil Company, predecessor of Bestfoods, today part of Unilever.
- American Sugar Company, now Amstar Holdings.
- American Tobacco Company, divided into 1911 year.
- Chicago Gas Company, bought by Peoples Gas. 5.Light & Coke Co. in 1897 year (теперь Peoples Energy Corporation).
- Distilling & Cattle Feeding Company, now Millennium Chemicals.
- Laclede Gas Light Company, existing under the name The Laclede Group.
- National Lead Company, now NL Industries.
- North American Company, divided into 1940 году Tennessee Coal, Iron and Railroad Company, bought by U.S. Steel в 1907 year.
- U.S. Leather Company, ceased to exist in 1952 year.
- U.S. Rubber Company, renamed Uniroyal in 1967 year and bought by Michelin in 1990 year.
In the 80s and, especially, in the 90s there was a rapid growth of the index. 21-th November 1995 year he first crossed the bar in 5000 points (5023,55), and 29 Martha 1999 years behind the mark 10000 (10006,78). Just a month later, 3-it may 1999, index reached value 11014,70. Its maximum is a mark 11722,98 - Dow Jones index reached January 14th 2000 of the year. Then there was a sharp drop in the index and on October 9 2002 DJIA hits an intermediate low in 7286,27 item.
The largest percentage collapse of the index occurred in “Black Monday (1987)” (Black Monday), when the Dow Jones lost 22,6%. On the first trading day after the terrorist attacks 11 September 2001 index lost 7,1%.
Among the disadvantages of the index is that, that covering with 1928 years only 30 Shares, the Dow Jones index is poorly suited to the role of an index of general stock market activity. For this reason, the S index has become increasingly popular lately.&P 500.
Until now, this index is calculated by journalists. (editorial committee of The Wall Street Journal) - they determine, which companies should join DJIA. This is a tribute to the tradition and memory of Charles Doe.
At the moment, the Dow Jones Industrial Average covers the following 30 companies:
- 3M Co.(MMM) (industrial holding)
- Alcoa Inc. (AA) (aluminum production)
- Altria Group, Inc. (MO) (tobacco company)
- American International Group, Inc. (AIG) (страх.комп.)
- American Express Co. (AXP) (Financial services)
- Boeing Co. (BA) (aircraft construction and defense)
- Catepillar, Inc. (CAT) (agricultural and construction equipment)
- Citigroup, Inc. (C) (investment bank)
- Coca-Cola Co. (KO) (Drinks)
- E.I. from the Pont de Nemours & Co. (DD) (chemistry)
- Exxon Mobil Corp. (XOM) (oil and gas company)
- General Electric Co. (GE) (industrial holding)
- General Motors Corp. (GM) (car production)
- Hewlett-Packard Co. (HPQ) (Computer Engineering)
- Home Depot, Inc. (HD) (building materials stores).
- Нoneywell International, Inc. (SHE) (industrial holding)
- Intel Corp.. (INTC) (Semiconductors)
- International Business Machines Corp. (IBM) (Computer Engineering)
- JPMorgan Chase and Co. (JPM) (investment bank)
- Johnson & Johnson Inc. (JNJ) (chemistry)
- McDonald’s Corp. (MCD) (restaurants)
- Merck & Co. Inc (MRK) (pharmaceutics)
- Microsoft Corp. (MSFT) (software).
- Pfizer, Inc. (PFE) (pharmaceutics)
- Procter & Gamble (PG) (household chemicals)
- SBC Communication, Inc. (SBC) (telecommunications)
- United Technologies Corp. (UTX) (industrial holding)
- Verizon Communication (VZ) (telecommunications)
- Wall-Mart Stores, Inc. (WMT) (retail network)
- Walt Disney Co. (DIS) (entertainment)
Let's add only, that until autumn 1999 G. the Dow Jones index was calculated on the stocks of only the New York Stock Exchange NYSE and only then two NASDAQ stocks appeared in it - Microsoft and Intel.
- Composite index – Nasdaq Composite
All shares of issuers, listed on NASDAQ, directly affect the state of the composite index – Nasdaq Composite. The degree of this influence depends on the market value of the company., which is determined by multiplying the total number of issued securities by the market value of one share.
Top 100 NASDAQ Issuers, excluding financial companies, merged into the Nasdaq-100 index. Initially, the weight of the company in the index was calculated as in the Nasdaq Composite, but since December 1998 a more sophisticated methodology was introduced. Now the total capitalization of the company is multiplied by “weight coefficient”, from which the share of the stock in the Nasdaq-100 is added. Despite these changes, leading roles in the leaderboard index, as before, the monsters of the market with multi-billion capitalization continue to play.
So, on 20 november 2000 year, the five largest corporations had a combined weight in the Nasdaq-100 index, equal 28,5%:
Cisco Systems (CSCO) – 7.64%
Microsoft (MSFT) – 7.16%
Intel (INTC) – 5.69%
QUALCOMM (QCOM) – 4.47%
JDS Uniphase (JDSU) – 3.54%
- Index S&P 500
The most common among stock market professionals are the Standard family indices. & Poor’s. These are indices, calculated by 100 And 500 shares, as well as more 90 sectoral. The base cost is taken equal to 10 as of 1941-1943 yy.
S&P 500 Is a list 500 selected US public companies, with the largest capitalization. The list belongs to the company Standard & Poor's and she is also compiled.
Shares of all companies from the S list&P 500 traded on the largest American stock exchanges, such as NYSE and NASDAQ.
Index S&P 500 competes in popularity with the Dow Jones industrial index and is deservedly called the barometer of the American economy.
S&P 500 is not a simple list of the largest US companies, since companies do not fall into it, privately owned and company, whose shares have insufficient liquidity. Besides, when compiling the list, the authors try to best represent the various sectors of the American economy.
