What Does Index Mean in the Stock Market?

by Dan Chruscinski ; Updated July 27, 2017

Knowing the terminology of the stock market is key to understanding the ups and downs associated with your investments. One term that is brought up when discussing the market is "stock market index," which can be shortened to simply "index."

Definition

The index is defined as the value of a specific sampling of stocks. This sampling can include all stocks in a certain region or stocks that are all related to a specific type of business, such as electronics or housing.

Measurement

An index is measured in terms of differences from the previous day. For example, the stocks in an index may have increased in value by 4 percent over the previous day or ended with a 2 percent loss over the end of the last day.

Usage

Stock market indices are used to determine trends in the market, which can then be applied to your portfolio. For example, if the NYSE Composite Index is down 5 percent, you can expect your portfolio of stocks in the index to also be down.

Examples

According to the U.S. Securities and Exchange Commission, some examples of stock market indices include the NYSE Composite Index, Dow Jones Industrial Average, Russell 2000 Index and the Nasdaq 100 Index.

About the Author

Dan Chruscinski has written pieces for both business and entertainment venues. His work has appeared in "Screen Magazine" as well as websites such as Starpulse.com. Chruscinski graduated in 2006 with a degree in English literature from Illinois State University.

Photo Credits

  • Hemera Technologies/AbleStock.com/Getty Images