Rising session for the bovespa, which closed on Thursday, July 28, with increases of 1.14%, to 102,596.66 points. The bovespa it scored a maximum volume of 102,685.67 points and the minimum figure of 101,044.69 points. The trading range for bovespa between its highest and lowest point (maximum-minimum) during this day stood at 1.6%.
In reference to the profitability of the last seven days, the bovespa accumulates a rise of 3.6%; but in the last year it still maintains a drop of 18.58%. The bovespa it is 15.61% below its maximum this year (121,570 points) and 6.74% above its minimum price so far this year (96,121 points).
What is a stock index and what is it for?
A stock index is an indicator that shows how the price of a set of assets is evolving, so it uses data from various companies or sectors of a fragment 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 industry, in addition, there are some indices that only take into account count a handful of shares to determine their value or others that consider hundreds of shares.
Stock market indices serve as an indicator of confidence in the stock market, business confidence, the health of the national and global economy, and the performance of investments in a company’s stocks and shares. If investors lack confidence, stock values will tend to fall.
They also work to measure the performance of an asset manager and allow investors to have comparisons between return and risk; measure the opportunities of a financial asset or create portfolios.
These types of indicators began to be used at the end of the 19th century after the journalist Charles H. Dow. carefully researched how company stocks tended to go up or down in price together, so he created two indices: one containing the top 20 railroad companies (it was the biggest industry at the time), as well as 12 actions of other types of businesses
There are currently various indices and they can be associated based on their geographical location, sectors, company size or also the type of asset, for example, the Nasdaq US index is made up of the 100 largest companies largely related to the technologies such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Tesla (TSLA), Nvidia (NVDA), PayPal (PYPL), Comcast (CMCSA), Adobe (ADBE ).
How to read an index?
Each stock index has its own way of being calculated, but the main factor is the market capitalization of each company that is part of it. This is obtained by multiplying the value of the day of the action 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 of their composition. Said report must be published every three or six months, as appropriate.
Reading a stock index also requires observing its changes over time. New indices always appear with a fixed value based on the prices of the securities on their start date, but not all follow this method. Therefore, it can lead to inaccuracies.
If one index gains 500 points in one 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, it can be concluded that, in percentage terms, the gains for the latter were higher.
What are the main stock indices?
Among the main stock market indexes in the American Union is the Dow Jones Industrial Average, better known as Dow Jones, which is made up of 30 companies. Similarly, the S&P 500, which includes 500 of the largest companies on the New York Stock Exchange. Finally comes the Nasdaq 100, which brings together 100 of the largest non-financial firms.
On the other hand, the most important indices in Europe are the Eurostoxx 50, which covers the 50 most important companies in the eurozone. On the other hand, the DAX 30, the main German index that contains the most outstanding 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, we have the Nikkei 225, made up of the 225 largest companies on the Tokyo Stock Exchange. There is also the SSE Composite Index, which appears as the most solid in China, made up of the most relevant 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 powerful firms of the Mexican Stock Exchange (BMV). At least a third of them belong to the capital of tycoon 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.
Finally, 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.