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Definition and types of stock index

1. Definition of stock index

The stock index is the stock price index. It is an indicator number compiled by a stock exchange or financial service institution to indicate changes in the stock market. Due to the ups and downs of stock prices, investors are bound to face market price risks. It is easy for investors to understand the price changes of a specific stock, but it is not easy and troublesome to understand the price changes of multiple stocks one by one.

To adapt to this situation and needs, some financial service institutions use their business knowledge and the advantages of familiarity with the market to compile stock price indexes and publish them publicly as indicators of market price changes. Based on this, investors can test the effects of their investments and use them to predict stock market trends.Meanwhile, the press, executives, and even politicians also refer to this indicator to observe and predict social, political, and economic development.

2. The calculation method of stock index

2.1 Calculation of the average stock price

  ● Simple arithmetic stock average

  ● Revised average number of shares

  ● Weighted average stock price

2.2 Calculation of stock index

  ● Relative method

  ● Comprehensive method

  ● Weighting method

3. Several famous stock indexes

3.1 Dow Jones Stock Index

3.2 Standard & Poor's Stock Price Index

3.3 New York Stock Exchange Stock Price Index

3.4 Nikkei Dow Jones Stock Index (Nikkei Average Stock Price)

3.5 "Financial Times" Stock Price Index

3.6 Hong Kong Hang Seng Index

4. Chinese stock indexes

4.1 Shanghai Stock Exchange Composite Index

The Shanghai Stock Exchange (SSE) Composite Index is a capitalization-weighted index officially released on December 19, 1990. The sample of the stock index is all the stocks listed on the Shanghai Stock Exchange, with newly listed stocks included in the calculation of the stock index on the second day of listing.

The weighting of the stock index is the total equity of the listed companies. Because the stocks of listed companies in China consist of tradable shares and non-tradable shares, their circulation is not consistent with their total equity. Consequently, stocks with a greater total equity amount have more impact on the stock index. The Shanghai Composite Index often becomes the tool for institutional investors to manipulate the market, making the movement of this index deviate from the rise and fall of most stocks. The release of the Shanghai Composite Index is almost synchronized with the changes in the stock market. It is an indispensable reference for Chinese stockholders and securities practitioners to study and forecast the trend of stock price changes.

4.2 Shenzhen Composite Stock Index

It is a stock index compiled by the Shenzhen Stock Exchange, with the base period of April 3, 1991. The calculation method of the stock index is the same as that of the Shanghai Stock Exchange. Itssample is all the stocks listed on the Shenzhen Stock Exchange, and itsweight is the total equity of the stock. Since the index is based on all listed companies, it is widely represented and released at the same time with the Shenzhen stock market. This indexis an indispensable reference for stockholders and securities practitioners to study and judge the trend of Shenzhen stock price changes.

In the past few years, because the Shenzhen Stock Exchange was not as active as the Shanghai Stock Exchange, the Shenzhen Stock Exchange has changed the method of stock index compilation and adopted constituent stock indexes. Only 40 stocks were selected in 1995. The release began in May. At present, the Shenzhen Stock Exchange has two stock indexes, one is the old Shenzhen Composite Index, and the other is the current constituent stock index, but the difference between the two indices is not particularly obvious in the light of the performance of the last three years.

4.3 SSE 180 Index

The Shanghai Stock Exchange (SSE) officially released the SSE 180 Index on July 1 to replace the former SSE 30 Index. The newly compiled SSE 180 index is expanded to 180 selected stocks, which are some large, liquid and industry-representative.

The index not only makes a breakthrough in the scientific compilation method, the representativeness of the constituents and the openness of the constituents, but also restores and enhances the market representativeness of the constituent indices, thus reflecting the stock price movements more comprehensively. Statistics show that the outstanding market capitalization of SSE 180 index accounts for 50% of the outstanding market capitalization of Shanghai, and the turnover also accounts for 47%. The launch of the index will be conducive to the introduction of indexed investment, guide investors to invest rationally, and promote the market's focus on "blue chips".

4.4 CSI 300 Index

CSI 300 Index is a constituent stock index compiled from 300 A-shares in Shanghai and Shenzhen securities markets.

The CSI 300 Index covers about 60% of the market capitalization of the Shanghai and Shenzhen stock markets and is highly representative of the market. CSI 300 Index is the first index jointly issued by Shanghai and Shenzhen stock exchanges to reflect the overall trend of the A-share market. The launch of the index enriches the existing index system, adds an index for observing the market trend, helps investors to fully grasp the market situation, and further provides the foundation for the innovation and development of index investment products.

5. Stock index and investment income

The stock index is a positive proportional function of the market value of the index portfolio. And the upside or downside of the stock index is the rate of return on this portfolio. However, in the calculation of the stock index, the transaction costs of the stock are not deducted. Therefore, the actual return of the stock investors will be less than the margin of increase or decrease of the stock index (the margin of increase or decrease of the stock index is the maximum investment return of the index portfolio).

There is an often-circulated adage in the stock market that bulls earn and bears lose, which means that stockholders make profits in a bull market and lose in a bear market. However, if you analyze stockholders as an investment as a whole, stockholders may not be able to make profits in a bull market.

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