If you are an investor, you must understand what stock indices are and what they are used for. A stock index is a statistical indicator that reflects the change in the price of the main shares listed on a given stock exchange and can be used as an investment tool.

Stock indices are benchmark instruments characteristic of the world of finance and essential for investors. They are tools that measure the performance of a specific group of assets in the stock market, providing a clear view of the price of a set of related stocks or securities.

There are multiple indices around the world which, as Joan Benedicto, 11Onze agent, points out, ‘will tell us whether shares in a particular economic sector are rising or falling in price and how they will perform as a whole’. Therefore, they can be key when it comes to knowing the stock market and making investments.

What are the main stock market indices?

Stock market indices can include from a few to hundreds of companies. The best-known international examples are:

• The Dow Jones Industrial Average (DJIA), created by Charles Henry Dow, editor of The Wall Street Journal, measures the share prices of the 30 largest companies listed on the New York Stock Exchange.
• S&P 500, which includes the 500 largest companies in the United States and is considered the most representative of the real market situation.
• NASDAQ, which includes the largest market capitalisation technology companies and other companies in high-growth sectors.
• FTSE 100, pronounced ‘Footsie one hundred’, is a stock market index published by the Financial Times and comprises the top 100 stocks on the London Stock Exchange.
• NIKKEI 225, the main indicator of the Tokyo Stock Exchange that measures the results of the 225 Japanese public companies with the highest capitalisation and liquidity belonging to various industrial sectors.
• In the case of Spain, we find the IBEX 35. Therefore, when you hear that, for example, the Spanish stock market has fallen by 0.10%, it means that the market values of the thirty-five companies in the main stock market index of the Spanish market have fallen by 0.10%.

These indices work by points, which will increase or decrease depending on the evolution of the value of the companies that make up the index, but as Benedicto explains, ‘we have to bear in mind that not all the companies that make up these indices are taken into account equally, while some may influence the index by 10%, others may only influence it by 0.5%’.

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