Start of the day without changes for the FTSE MIB IDX, which opens the day on Wednesday, May 18 with a variation of 0.01%, to 24,303.94 points, after the start of the opening session. Compared to previous days, the FTSE MIB IDX chains two consecutive sessions in positive figures.
Regarding the last seven days, the FTSE MIB IDX accumulates a rise of 2.44%; On the other hand, for a year it still maintains a drop of 2.37%. The FTSE MIB IDX it is 13.7% below its maximum this year (28,162.67 points) and 9.67% above its minimum value so far this year (22,160.28 points).
What is a stock index and what is it for?
A stock market index is an indicator that shows how the value of a certain set of assets changes, for which it takes data from various companies or sectors of a part of the market.
These indicators are mainly used by the stock exchanges of the countries and each one of them can be integrated by firms with specific requirements, such as having a similar market capitalization or belonging to the same type of industry, also, there are some indices that only they take into account a handful of shares to determine their value or others that consider hundreds of shares.
Stock indices serve as an indicator of confidence in the stock market, business confidence, the health of the national and global economy, and the return on investment in a company’s stocks and shares. Generally, if investors lack confidence, stock values tend to fall.
They also work to measure the performance of an asset manager and allow investors to analyze comparisons between return and risk; measure the opportunities of a financial asset or create portfolios.
This type of indicators began to be used at the end of the 19th century after the journalist Charles H. Dow. closely watched how company stocks tended to go up or down together in price, so he created two indices: one containing the top 20 railroad companies (since it was the biggest industry at the time), as well as 12 actions of other types of businesses
Today in our economy there are various indices and they can be put together based on their geography, sectors, the size of the companies or the type of asset, for example, the Nasdaq US index is made up of the 100 largest companies mostly related to technologies such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Tesla (TSLA), Nvidia (NVDA), PayPal (PYPL), Comcast (CMCSA), Adobe ( ADBE).
How is a stock index measured?
Each stock index has its own way of being calculated, but the main factor is the market capitalization of each firm that is part of it. This is obtained by multiplying the value of the day of the bond in the corresponding stock market by the total number of shares that are in the hands of investors.
Companies listed on the stock exchange are required to present a balance sheet of their composition. This report must be published every three or six months, as appropriate.
Reading a stock index also requires analyzing its variations over time. New indices always start with a fixed value based on share prices on their start date, but not all follow this method. Therefore, it can be misleading.
If one index adds 500 points in a day, while another only adds 20, it might appear that the first index outperformed. However, if the former started the day at 30,000 points and the other at 300, you can see that, in percentage terms, the gains for the latter were higher.
These are the main stock indices
Among the main stock market indices in the United States is the Dow Jones Industrial Average, better known as Dow Jones, made up of 30 companies. Similarly, the S&P 500, which includes 500 of the largest companies on the New York Stock Exchange. Finally, we must not forget the Nasdaq 100, which brings together 100 of the largest non-financial firms.
On the other hand, the most prominent indices in Europe are the Eurostoxx 50, which covers the 50 largest companies in the eurozone. On the other hand, the DAX 30, the main German index that contains the strongest companies on the Frankfurt Stock Exchange; the FTSE 100 of the London Stock Exchange; the CAC 40 of the Paris Stock Exchange; and the IBEX 35, of the Spanish stock market.
In Asia, the main stock indices are the Nikkei 225, made up of the 225 largest companies on the Tokyo Stock Exchange. There is also the SSE Composite Index, which can be considered the most representative of China, made up of the most prominent companies on the Shanghai Stock Exchange. Similarly, it is worth mentioning the Hang Seung Index in Hong Kong and the KOSPI in South Korea.
Regarding Latin America, there is the IPC, which contains the 35 most consolidated firms of the Mexican Stock Exchange (BMV). At least a third of them are owned by magnate Carlos Slim.
Another is the Bovespa, made up of the 50 most important companies on the São Paulo stock exchange; the Argentine Merval; the IPSA of Chile; the MSCI COLCAP of Colombia; the IBC of Caracas, made up of 6 companies from Venezuela.
Likewise, there are other types of global stock indices such as the MSCI Latin America, which includes the 137 most important companies in Brazil, Chile, Colombia, Mexico and Peru.
Similarly, there is the MSCI World, which includes 1,600 companies from 23 developed countries; the MSCI Emerging Markets, made up of more than 800 companies from developing countries; and the S&P Global 100, made up of the 100 most powerful multinational firms on the planet.