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Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Indexes measure the ups and downs of stock, bond, and some commodities markets, in terms of market prices and weighting of companies in the index.
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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.
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The relative value of a variable in comparison with itself on a different date. Many security price indicators such as the Standard & Poor's series and the New York Stock Exchange series are constructed as indexes. Also called stock index. See also base period.


To adjust a variable by a selected measure of relative value. For example, it has been proposed that an investor's basis on a security be indexed for changes in consumer prices so that only real increases in value will be taxed. Also called tax indexing. See also subindex.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


An index reports changes up or down, usually expressed as points and as a percentage, in a specific financial market, in a number of related markets, or in an economy as a whole.

Each index -- and there are a large number of them -- measures the market or economy it tracks from a specific starting point. That point might be as recent as the previous day or many years in the past.

For those reasons, indexes are often used as performance benchmarks against which to measure the return of investments that resemble those tracked by the index.

A market index may be calculated arithmetically or geometrically. That's one reason two indexes tracking similar markets may report different results. Further, some indexes are weighted and others are not.

Weighting means giving more significance to some elements in the index than to others. For example, a market capitalization weighted index is more influenced by price changes in the stock of its largest companies than by price changes in the stock of its smaller companies.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


(1) A statistical indicator that measures changes in the economy in general or in particular areas.An example is the cost-of-living index.(2) A reference point against which measurements are taken for purposes of making future adjustments.An adjustable-rate mortgage might begin with an interest rate of 6 percent and provide that it will increase or decrease in a like percentage as the increase or decrease between today's quoted price for 10-year U.S.Treasury bonds and the price on the loan's annual anniversary date.We would say that 10-year T-bonds are the index.

Some leading loan indices include

• Wall Street Journal prime
• Federal discount rate
• Fed funds rate
• 11th District Cost of Funds
• 10-year Treasuries
• One-year LIBOR

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Periods the asset is not an indexed asset are not taken into account.
The stock can be an indexed asset but only equal to the ratio of the value of the mutual fund's or REIT's indexed assets to the total value of its assets.
Mercifully, the contract provides a rule of convenience: If a mutual fund's or REIT's ratio is 90% or more, the entire stock is indexed and, conversely, if the ratio is 10% or less (highly improbable for a mutual fund) none of the stock is indexed.
After 1996, both the credit and phaseout threshold would be indexed for inflation.
To illustrate the policies, Old Mutual tracks the 30-year performance of the index based on the average annual gains of the tour purchase dates and the existing terms of the equity indexed universal life insurance contracts.
Phelps said Old Mutual projects a $150 million to $200 million industry wide equity indexed universal life insurance market this year and a $500-million market once it matures.
American General Life Insurance Co., part of American International Group, led the equity indexed universal life insurance market in 1999 with $20.4 million in sales, nearly a third of the market share.
A series of hurdles must be overcome before issuance of indexed debt moves from a promising alternative to a useful policy instrument.
Before-tax nominal returns on coupon-beating indexed and unindexed instruments may well have to differ to pay the same after-tax compensation to investors.
However, of greater importance, those adverse cash flow implications of zero-coupon securities now or indexed debt in the future likely render these instruments less attractive to some classes of investors.
Under those circumstances, the Treasury may have to offer an elevated real return to place its indexed debt issue relative to that expected from its nominal debt, which is purchased by more investors.