Chapter 14. Exchange indices of the world economy

Let’s start looking at the major stock market indices of the world economy. The S&P500 index (Standard and Poor’s 500) is the so-called “broad market index”. To calculate it, the base value of the values of certain groups of shares is compared with their current market rates. For the basis of calculation of the base value the values of stock quotations for the period from 1941 to 1943 are taken and it is assigned the value of 10. Thus, if, for example, now the S&P500 index is equal to 200, it means that the average rate of five hundred shares included in the index has increased 20 times (200:10) in comparison with the period of 1941-43. Many professional investors use the S&P500 index in their analysis, believing that this index most accurately reflects the general picture of changes in rates on the stock market.

NASDAQ index (National Assosiation of Securities Dealers Automated Quotations) reflects the turnover of securities on the over-the-counter market. It is published by the national securities trading association, taking its quotations as a basis (in the USA). The NASDAQ index is calculated similarly to S&P500, but the value of shares as of 05.02.1971 is taken as the basis (base), and the value of the base is equal to 100. To calculate the NASDAQ composite index, the values of all common stocks traded in its system are used (currently it is more than 4,200 shares).

DJIA index (Dow Jones Industrial Average), the so-called “industrial average” index of Dow Jones. It is compiled on the basis of the rates of 30 issues of shares of industrial companies, which were selected based on their market valuation and the degree of distribution among a large number of investors. The stocks comprising this group are issued by highly rated industrial companies. The behavior of these stocks is believed to have a significant impact on the dynamics of the securities market as a whole. Due to mergers and bankruptcies of companies, as well as the appearance of new strong companies on the market, the list of stocks included in the DJIA index basket is regularly adjusted. The Dow Jones index itself is an arithmetic average of the rates of these stocks.

Nikkei-225 index is a special index of securities rates, which reflects the situation on the Tokyo Stock Exchange. For its compilation the shares of 225 Japanese companies are used, it is calculated by the methodology similar to that of the Dow Jones index.

AMEX (American Stock Exchange) index is a typical stock index reflecting the movement of stock prices on the American Stock Exchange. The movement is calculated against a base value of 100, which was set as of 08/31/1973. The index takes into account all issues of stock that are traded on the American Stock Exchange.

The DAX30 index is the main and most important index of Germany, the index basket of which includes the rate values of more than 30 shares of the largest companies that are traded on the Frankfurt Stock Exchange.

NYSE (New York Stock Exchange) index – calculated similarly to the S&P500 and NASDAQ indices, it covers all shares traded on the New York Stock Exchange (namely 2,200 shares). When calculating the index, a base value of 50 is used, for which the share price as of 31.12.1965 is taken.

FTSE100 index (Financial Times Industrial Ordinary Share Index) was created in 1935 by Financial Times agency and is the oldest index of Great Britain. Its listing contains shares of one hundred companies with different business profiles. This listing includes stocks selected by specialists, including representatives of the Financial Times.

In France, the main indices are: CAC-40 and CAC General. These indices are calculated by the Paris Bourse and the Society of French Exchanges and contain 40 and 250 of the largest French companies in the index basket, respectively.