What is a Stock Market Index?

What is a Stock Market Index

Indices are indicators that measure the proportional change of investment instruments traded on the stock exchange over a certain period of time by collecting data such as price, cost, sales and production. Stock market indices, on the other hand, serve to measure the price and return performance of stocks traded on the stock exchange. These measurements can be made both on a holistic and sectoral basis. In this way, it is possible to monitor the economic performance of stocks and sectors.

It allows to measure the price movements of the stocks that will be included in the index under certain conditions and thus to determine the general trend of the stock market.

What are the Important Indices?

The most important indices traded on Borsa Istanbul, where the most transactions are realized in Turkey, are BIST 100, BIST 50, BIST 30 and BIST Banking indices.

• The BIST 100 Index consists of the 100 stocks traded on Borsa Istanbul with the highest market capitalization and trading volume and is the main index of the Equity Market. It also includes companies in BIST 50 and BIST 30.
• The BIST 50 Index measures the stocks of the 50 companies with the highest market capitalization and trading volume.
• BIST 30 Index measures the stocks of the 30 companies with the highest market capitalization and trading volume.
• BIST Banking Index; It consists of 10 stocks selected among the banks traded in the national market.

What are the World's Major Stock Market Indices?

The stock market indices with the highest trading volume in the world market are; Dow Jones 30, Nasdaq 100, S&P 500, FTSE 100, DAX 40.

• The Dow Jones 30 Index, also known as the Index, is a weighted average of the stocks of the 30 companies with the highest market capitalization, traded on both the New York Stock Exchange and Nasdaq.
• The Nasdaq 100 Index, also known as the technology index, is composed of the stocks of the 100 companies with the highest market capitalization traded on the Nasdaq Stock Exchange, one of the largest stock exchanges in the US.
• The S&P 500 Index is organized by Standard & Poor's and includes the stocks of the 500 largest companies in the US.
• The FTSE 100 Index is an index of the stocks of the 100 British companies with the highest market capitalization traded on the London Stock Exchange.
• DAX 40 Index; It is an index calculated for the Frankfurt Stock Exchange and measures the performance of the 40 largest German companies by market capitalization. It carried 30 members until 20 September 2021, when the index was expanded to 40.

Factors Affecting Stock Market Indices

Factors affecting stock market indices are divided into two categories: endogenous and exogenous factors. As stock market indices are an indicator for the country's economy, it is also important to know which factors have what kind of effects on stock market indices. Domestic factors include economic data, unemployment figures, interest rates, geopolitical position and risks. These factors, which include important data on the country's economy, have a great impact on stock market indices. External factors are global data and economic relations between countries. The course of global markets and the relations between countries within this market are important for the stock market indices of all countries.

What are Borsa Istanbul Indices?

Borsa Istanbul Indices;

• BIST 100 Index
• BIST 50 Index
• BIST 30 Index
• BIST 100 - 30 Index
• BIST Corporate Governance Index
• BIST All Index
• BIST Star Index
• BIST Main Index

How to Invest in Stock Indices?

You can invest in indices traded in futures, CFDs, commodities, stocks, etc. and carry out trading transactions. Among all these, stocks are the instruments that offer the highest return opportunity. Because both the difference between buying and selling and the receipt of dividends make the stock an advantageous instrument that is constantly followed by investors. The indices with the highest trading volume within Borsa Istanbul are BIST 100 and BIST 30. Before investing in these indices, the performance of the shares within the index should be monitored and the factors affecting the stock market index and stock prices should be taken into consideration. Investors who want to invest in foreign stock exchanges should be careful about choosing a brokerage firm. The brokerage firm should have connections with foreign stock exchanges. After the brokerage firm selection is completed, an investment account can be opened and investment can be started.

Continue in the iEconomy Academy: Currencies and exchange rates, Market hours and holidays. Terms used in this lesson: Market Capitalization, Brokerage Firm.