The South Korean market opened in negative terrain on January 31

This year the markets have registered a constant volatility. (Infobae)

Negative day for KOSPI, which opens on Tuesday, January 31 with slight decreases of 0.31%, to 2,442.92 points, after the start of the opening session. If we compare the value with previous days, the KOSPI chains two consecutive dates in negative values.

Taking into account the last seven days, the KOSPI scores a 1.99% climb; however, in the last year it still accumulates a drop of 14.66%. The KOSPI it stands 1.65% below its maximum this year (2,484.02 points) and 10.11% above its minimum valuation so far this year (2,218.68 points).

What is a stock index and what is it for?

A stock index is an indicator used to show the evolution of the price of a certain set of assets, for which it takes data from different companies or sectors of a part of the market.

These indicators are mainly used by the stock markets of each country and each one of them can be integrated by firms with specific characteristics, such as having a similar market capitalization or belonging to the same type of industry. In addition, 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 performance of investments in stocks and shares of a company. 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 carefully analyze how the shares of companies tended to rise or fall together in price, he created two indices: one that contained the 20 largest railway companies (as it was the most important industry at the time), as well as 12 shares of other types of businesses

Currently in our economy there are various indices and they can be put together based on their geographical location, sectors, company size or even the type of asset, for example, the US Nasdaq index is made up of the 100 largest companies to a large extent. 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 calculation method, but the main factor is the market capitalization of each company that integrates it. This is obtained by multiplying the value of the day of the share in the corresponding stock market by the total number of shares that are in the hands of investors.

Companies listed on the stock market are required to present a balance sheet of their composition. Said report must come to light every three or six months, as appropriate.

Reading a stock index also requires examining its changes over time. Today’s indices always start 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 failures.

If one index gains 500 points in a day, while another only gets 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 assumed that, in percentage terms, the gains for the latter were higher.

What are the major stock indices?

Among the main stock indices in the United States is the Dow Jones Industrial Average, better known as Dow Jones, made up of 30 companies. Likewise, 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 important indices in Europe are the Eurostoxx 50, which covers the 50 most important companies in the euro area. On the other hand, 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 is listed as the most notable in China, made up of the most relevant companies on the Shanghai Stock Exchange. The same role played by 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 prestigious firms on the Mexican Stock Exchange (BMV). At least a third of them are owned by 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.

Similarly, 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 entire planet.

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