An index is a statistical measure usually expressed
as a percentage change from an established base value —
often but not always 100 — as of a certain date. For example,
the
NASDAQ
Composite Index
was established in February 1971
with a baseline value of 100. In contrast, the S&P 500 uses
the value of the index from 1941 to 1943 to measure the changing
level of its 500 stocks. Different baselines are the major reason
that indexes tracking similar segments of the market are at very
different levels.
These different baselines in combination with the different components of each index explain why percentage change in any period — whether day to day or month to month — is more revealing than the actual numerical value of an index, although the value is more commonly reported.
Although in name the DJIA is an average, changes in its value are reported as a percentage — the same way changes in an index are reported. As a result, it’s sometimes described as a hybrid measure.
These different baselines in combination with the different components of each index explain why percentage change in any period — whether day to day or month to month — is more revealing than the actual numerical value of an index, although the value is more commonly reported. 