Stock market index or index

A stock market index is a measurement tool for the evolution of a market and, as such, is representative of an asset class.

An index represents a basket of securities selected as representative of a particular market or sector of activity. Stock market indices have become essential instruments in portfolio management.

An index is constructed using a static and predefined group of securities, each assigned a given percentage, or weighting, within the index. The value of the index varies daily based on the valuation changes of each component. The composition of the index may be modified over time, but the methodology remains precisely defined and transparent in all cases.

Indices generally track a specific market (or market segment). Some can be very broad, such as the FTSE World, or more specialized by targeting a specific country or region (such as China or Europe). Some indices focus on specific market segments like information technology or new energies, or investment themes such as smart cities or gender equality. The most representative securities of these categories are selected to form the composition of an index.

There are several major families of indices, which break down into a range of indices each measuring a subclass of assets: STOXX indices (European equity indices), MSCI (equity indices), JP Morgan (bond indices). The index measures the performance of the corresponding market.

It also serves as a tool for comparing the performance of a fund or an investment strategy (see "Reference index or benchmark").