This year the markets have registered a constant volatility. (Infobae)
Negative day for KOSPI, which closed on Tuesday, January 31, with falls of 1.04%, to 2,425.08 points. The KOSPI marked the maximum figure of 2,457.48 points and a minimum volume of 2,423.37 points. The trading range for the KOSPI between its highest and lowest point (maximum-minimum) during this day it stood at 1.39%.
Taking into account the last week, the KOSPI accumulates an increase of 1.24%; On the other hand, for a year it has still accumulated a decrease of 15.29%. The KOSPI it stands 2.37% below its maximum for this year (2,484.02 points) and 9.3% above its minimum valuation for the current year (2,218.68 points).
What is a stock index and what is it for?
A stock index is an indicator that shows how the price of a certain set of assets changes, for which it collects data from different companies or sectors of a part of the market.
These indicators are used mainly by the stock markets of different countries around the world and each one of them can be made up of companies with certain characteristics, such as having a similar market capitalization or belonging to the same industry; likewise, there are some indices that only they consider 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 performance of investments in shares and shares of an entity. Generally, if investors do not have confidence, the costs of shares will tend to fall.
They also work to measure the performance of an asset manager and allow investors to analyze risk vs. return comparisons; 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. To see carefully how the shares of the companies tended to rise or fall together in price, so he created two indices: one that contained the 20 most important railway companies (since it was the most important industry at the time), as well as 12 shares of other types of businesses
Today in humanity there are various indices and they can be grouped based on their geography, sectors, the size of the companies or even the type of asset, for example, the US Nasdaq 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 it calculated and how to read them?
Each stock index has its own calculation method, but the main factor is the market capitalization of each company that integrates it. This is obtained by multiplying the daily value of the share in the corresponding stock market by the total number of shares that are in the market.
The companies that are in the stock market are obliged to present a balance sheet of their composition. Said report must be notified every three or six months, as the case may be.
Reading a stock index also requires observing its changes over time. New indices always open at a fixed value based on the stock prices on their start date, but not all follow this method. Therefore, it can lead to failures.
If one index adds 500 points in one day, while another only adds 20, it might appear that the former performed better. However, if the former started the day at 30,000 points and the other at 300, it can be deduced that, in percentage terms, the gains for the latter were more remarkable.
The main stock indices
Among the main US stock indices 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, the Nasdaq 100 appears, which associates 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 euro area. In addition, the DAX 30, the main German index that contains the most prominent 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.
On the Asian continent, we have the Nikkei 225, made up of the 225 most important companies on the Tokyo Stock Exchange. There is also the SSE Composite Index, which appears as the preponderant of 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.
With regard to the Latin American region, there is the IPC, which contains the 35 most outstanding firms on 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 Sao Paulo Stock Exchange; the Merval from Argentina; the IPSA of Chile; the MSCI COLCAP of Colombia; the IBC of Caracas, made up of 6 companies from Venezuela.
There are also 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 entire planet.
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