What is Index?
What is Index?
An index is the standardized value of a data or group of data. Index in terms of financial markets; A statistical measure that measures the movement of a group of securities, sectors, asset classes, markets, investment strategies, or other data.
In financial markets, an index can also be defined as a group of securities or a hypothetical portfolio of securities representing this group. To give an example, BIST 30 Index is defined as the index that measures the performance of the 30 stocks with the highest market value and transaction volume of shares in actual circulation, traded on the Yıldız Market within Borsa Istanbul.
Indices provide a snapshot of the market they represent, meaning they serve as reference points. In this way, the tendency, trend or mood of the basket in question can be easily detected. For example, an increase in the BIST 30 Index means that the demand for the stocks that make up the index has increased, or in other words, investors demand more BIST 30 shares than they sell. The value of the index changes depending on the price movements of the assets it contains.
Indices; It is used to evaluate the performance of securities, analysis and trend tracking, comparison, risk management and to create new investment products, as well as price, cost, production, foreign trade, etc. It is also used to follow trends in macroeconomic data.
Indices are created to represent different asset classes. Stock indices are indices that reflect the performance of companies traded on a stock exchange. However, stock indices can be sector-based or consist of markets representing a certain geographical region.
Bond market indices are indices that evaluate the performance of a particular bond market. Gold, precious metals, oil, agricultural products, etc. Commodity indices are used to follow the price movement of commodities or commodity groups. Foreign exchange indices are indicators that measure the value of a particular country's currency against other important currencies. Macroeconomic indices can be defined as indices that reflect the economic performance of a country.
How is the Index Calculated?
In index calculation; Market value weighted or price weighted calculation method can be used.
In the price-weighted calculation method, the market price of the security in the index is used to determine its share, that is, its weight, in the relevant index. In other words, the weight of the stock with a high market price in the index will be greater than the share with a low market price. In this case, the index in question is more sensitive to changes in stocks with high market prices.
In the market value weighted calculation method, the total market value of the company in question is used to determine the share of the stock in the index, that is, its weight. In other words, the weight of the stock with a high market value in the index will be higher than the share with a low market value. In this case, the index in question is more sensitive to changes in stocks with high market values.
Borsa Istanbul Indices
In our country, various indices, especially BIST 30, BIST 50, BIST 100 indices, have been created to measure the performance of stocks traded in Borsa Istanbul as groups.
BIST 30 Index is an index that measures the performance of the 30 stocks with the highest market value and transaction volume of shares in actual circulation, traded on the Yıldız Market within Borsa Istanbul. BIST 50 Index is an index that measures the performance of the 50 stocks with the highest market value and transaction volume of shares in actual circulation traded on the Yıldız Market within Borsa Istanbul. BIST 50 Index also includes stocks included in the BIST 30 index.
BIST 100 Index is used as the main index for Borsa Istanbul Equity Market. It is an index that measures the performance of the 100 stocks with the highest market value and transaction volume of shares in actual circulation traded on the Yıldız Market within Borsa Istanbul. BIST 100 Index also includes stocks in BIST 30 and BIST 50 indices.
Global Stock Exchange Indices
The world's most important stock market indices are US stock indices. Dow Jones Index is an index that measures the performance of the 30 largest companies in the USA in terms of market value. On the other hand, the S&P 500 Index is a stock market index that tracks the stock performance of the 500 largest companies traded on the US stock exchanges. In addition, technology companies around the world are traded in the Nasdaq Index, which is aimed at the technology sector. All of these indices listed above are closely followed as an indicator of the course of the global economy, especially in the USA. Apart from the stock markets of other developed countries, there are also indices developed by independent data providers and followed on a global scale.
Other Indices
Dollar Index (DXY) is an index that measures the value of the US dollar against a basket of six major currencies. In other words, the Dollar Index measures the strength of the US dollar. A rise in the index means the US dollar is getting stronger against the basket, while a fall means the US dollar is getting weaker against the basket.
The Fear Index (VIX) is tracked as an indicator of market sentiment. This index is a measure of market participants' volatility expectations in the S&P 500 Index within a 30-day period. A high Fear Index means that the perception of fear and uncertainty towards the market is increasing.
