The South Korean index ended the day higher on February 3

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

positive day for KOSPI, which closed on Friday, February 3 with slight increases of 0.47%, to 2,480.40 points. The KOSPI he scored the maximum figure of 2,485.08 points and a minimum of 2,460.21 points. The trading range for the KOSPI between its highest and lowest point (maximum-minimum) during this day it stood at 1%.

Taking into account the last week, the KOSPI it records a decrease of 0.15%, so that in interannual terms it still accumulates a decrease of 8.82%. The KOSPI it stands 0.15% below its maximum this year (2,484.02 points) and 11.8% above its minimum price so far this 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 value of a certain set of assets changes, for which it takes data from various companies or sectors of a fragment of the market.

These indicators are used mainly by the stock markets of the countries 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 business type; 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 return on investment in a company’s stocks and shares. If investors are not confident, stock prices tend to fall.

They also work to measure the performance of an asset manager and allow investors to make a comparison 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. 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 humanity there are various indices and they can be grouped based on their location, sectors, the size of the companies or also the type of asset, for example, the US Nasdaq index is made up of the 100 largest companies that are largely 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 to read an index?

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 bond in the corresponding stock market by the total number of shares that are in circulation in the market.

Companies listed on the stock market are required 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 implies taking care of its evolution over time. New indices always start with a fixed value based on the stock prices on their start date, but not all follow this method. Therefore, it can be a source of misunderstandings.

If one index boosts itself by 500 points in a day, while another only adds 20, it might appear that the former performed better. However, if the first started the day at 30,000 points and the other at 300, it can be derived that, in percentage terms, the gains for the second were considerable.

What are the major 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, don’t forget the Nasdaq 100, which links 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 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.

In Asia, the main stock indices are the Nikkei 225, made up of the 225 largest companies on the Tokyo Stock Exchange. Likewise, the SSE Composite Index is seen 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 Latin America, 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.

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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