There are a wide variety of market indices. The most popular by far is the Dow Jones Industrial Average Index (DJII) – or simply Dow Jones – which reflects the performance of the 30 most important stocks that are traded on the American stock exchanges and has been calculated by the news agency Dow Jones since the year 1895.
The Financial Times Stock Exchange 100 Index, better known under the name FTSE 100 or even “Footsie”, reflects the performance of the 100 most important stocks listed on the London Stock Exchange, the CAC 40 is the index for the Paris stock market.
In addition to these “local” indices there is a whole series of indices that track the market performance of larger regions, such as the Stoxx 50, for example, that contains the 50 largest companies of Europe, or the Euro Stoxx 50 with the same number of companies from the euro zone.
Still other indices target specific economic sectors such as consumer goods, real estate, finance, health or telecommunications. Others measure the evolution of prices for various types of goods, such as raw materials, agricultural products or precious metals. Still others focus on the size of the targeted companies: “large-cap” companies or small and medium sized enterprises.
In principle, indices can be established for all kinds of goods traded on an organized market. While statistical methods may differ, the goal is always the same: to document the general evolution of a specific market in an objective and representative manner.