price index

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Index

A statistical measure of the value of a certain portfolio of securities. The portfolio may be for a certain class of security, a certain industry, or may include the most important securities in a given market, among other options. The value of an index increases when the aggregate value of the underlying securities increases, and decreases when the aggregate value decreases. An index may track stocks, bonds, mutual funds, and any other security or investment vehicle, including other indices. An index's value may be weighted; for example, securities with higher prices or greater market capitalization may affect the index's value more than others. One of the most prominent examples of an index is the Dow Jones Industrial Average, which is weighted for price and tracks 30 stocks important in American markets.

price index

price index

  1. a weighted average of the prices of a general ‘basket’ of goods and services produced in an economy over time, which is used in particular to indicate the rate of INFLATION. The RETAIL PRICE INDEX (RPI) is one commonly-used index, measuring the average level of the prices of final goods and services purchased by consumers. Each product in the index is weighted according to its relative importance in total consumer expenditure. A suitable base year is selected to commence the series (for example, index value 1990 = 100) and subsequent price changes are then reflected in changes in the index value over time (for example, 1999 = 200, indicating an annual rate of inflation of 10%). See INDEX-LINKED, PURCHASING POWER.
  2. a weighted average of the prices of particular classes of financial securities or commodities, for example the Financial Times 100 share index or all-share index. See SHARE PRICE INDEX.

price index

a weighted average of the PRICES of selected goods, services, commodities or financial assets measured over time. One commonly used price index is the CONSUMER PRICE INDEX (CPI), which measures the average level of the price of a general ‘basket’ of goods and services bought by final consumers. Each item in the index is weighted according to its relative importance in total consumers’ expenditure. Starting from a selected BASE YEAR (index value = 100), price changes thereafter are reflected in changes in the index value over time. Thus, taking the example of the UK Consumer Price Index (CPI), the current CPI base year is 1996 = 100; in 2004 the index value stood at 111, indicating that retail prices, on average, had risen 11% between the two dates. Such price indices can be used to measure the rate of INFLATION and as a GNP DEFLATOR. Another commonly used index of price is the Wholesale Price Index, which records the price of a ‘basket’ of goods measured in terms of wholesale prices.

In similar fashion, a SHARE PRICE INDEX such as the Financial Times Stock Exchange ( FTSE) - 100 share index is used to measure change in the price of STOCKS and SHARES over time. The TERMS OF TRADE index is used to measure the average prices of EXPORTS relative to IMPORTS over time. See PURCHASING POWER, FAMILY EXPENDITURE SURVEY, TRADE WEIGHTED INDEX.

References in periodicals archive ?
The Fisher index is defined as an unweighted geometric mean of Laspeyres and Paasche indexes, but it can also be expressed as a weighted arithmetic average of these two indexes.
But the assumption is that at the industry level the Laspeyres index equals the Fisher index, so we can drop the L superscript on [P.
Similarly, we estimated the national-level Fisher index by
The Fisher index is the product of the square root of a Laspeyres and a Paasche index.
The new formulation for aggregating industrial production is based on a Fisher index that updates the weights every year (but not every month).
Section 2 argued there were good justifications on both economic and axiomatic grounds for using the Fisher index to calculate productivity series.
Hence, the Fisher index also can be written as the product of its components, making it possible to decompose it in the various ways proposed for the Tornqvist index.
The appendix illustrates the construction of a Laspeyres index and a Fisher index in a simple case with a large change in the pattern of expenditure.
The next two articles in the series are critiques of the Fisher index, with the second also containing commentary on the logistics of adjusting for MFP growth when updating Medicare physician payments.
One of the advantages of the Fisher index is that the market basket is updated throughout the index, removing the inherent bias that would otherwise occur if the mix of goods changes over time.