What is the stock market index and how is it calculated?

In Borsa (Stock Market) Istanbul, there are BIST 100, BIST 30 and BIST 50 indices. The price of the index is formed according to whether...

Markets Desk·September 9, 2022

An index is an indicator that includes more than one stock, is calculated according to the weights of the stocks and measures proportional changes. Indices are divided according to the sectors of the stocks included in them.

In Borsa (Stock Market) Istanbul, there are BIST 100, BIST 30 and BIST 50 indices. The price of the index is formed according to whether the shares in the index gain or lose value. There are also sectoral indices. BIST Bank index, BIST SME Industry index, etc.

HOW IS THE STOCK MARKET INDEX CALCULATED?

The BIST 100 index gives investors an idea about many issues from the general course of the stock market to the country's economy. So, how is the BIST 100 index calculated? Here is the calculation formula;

Et = Value of the index at time t n = Number of shares (companies) included in the index Fit= Price of the "i" th share at time t Nit = Total number of "i" shares at time t Hit = The ratio of the "i"th share to the total number of shares in actual circulation used in the index calculation at time t Kit= coefficient of the "i "th share at time t Dt= The value of the exchange rate of the index at time t Bt = Divisor of the index at time t

Stock indices are calculated in two different ways: price and return indices. The difference between price and return indices arises from dividend payments. Dividends paid are not taken into account in price indices. In return indices, on the other hand, it is assumed that the dividends paid are reinvested in the stock market. The BIST 100 index is calculated as a price index unless otherwise stated. Follow Global Economic Developments on Social Media! to follow Ieconomy official Twitter account!

Frequently asked questions

What is a stock market index and what does it measure?

A stock market index is an indicator that includes a basket of stocks, calculated according to their weights, to measure proportional changes in a specific market or sector. It provides a snapshot of the collective performance of the included companies, offering insights into the general direction of the market or a particular industry segment.

How is a stock market index like the BIST 100 calculated?

An index like the BIST 100 is calculated using a formula that considers the price and quantity of each constituent stock, adjusted by factors like free-float ratios and coefficients. The value aggregates the weighted market capitalizations of the included companies, reflecting their collective price movements and market importance.

What are sectoral indices, and what is their purpose?

Sectoral indices, such as the BIST Bank index, track the performance of stocks within a specific industry or sector. They allow investors and analysts to gauge the health and trends of particular segments of the economy separately from the broader market.

What information does a major index like the BIST 100 provide to investors?

A major benchmark index like the BIST 100 provides investors with an idea about the general course of the stock market and can serve as a barometer for the country's economic sentiment. Its movements reflect the aggregated performance of leading companies, indicating overall market trends.