What are the differences between the Dow Jones Industrial Average (DJIA) index and the S&P 500?
If you open the business section of your favorite newspaper (or go to any financial news website) you will find quotes for the Dow Jones Industrial Average index as well as the S&P 500. They both measure the performance of large cap american stocks. So, how do they differ?
The first and most obvious way in which they differ is the number of components. The DJIA contains 30 stocks while the S&P 500 is calculated based on, not surprisingly, 500 stocks. That mere fact should indicate that the S&P 500 would be a more accurate index (as it includes a greater number of large-cap stocks) but there is one other difference and it is in fact the most important one.
Showing posts with label stocks. Show all posts
Showing posts with label stocks. Show all posts
Tuesday, February 16, 2010
Monday, February 15, 2010
International Stock Indices
What are the main international stock indices and why are they important to my trading?
Just like the S&P 500 can be seen as a proxy for what is happening to the equity of US companies there are indices that act as a barometer for the health of stock markets worldwide.
There are several reasons that traders keep an eye on stock markets worldwide:
Just like the S&P 500 can be seen as a proxy for what is happening to the equity of US companies there are indices that act as a barometer for the health of stock markets worldwide.
There are several reasons that traders keep an eye on stock markets worldwide:
Market Up, Market Down
When I read in the news or hear people say that the market was up today or that it has been down lately, what exactly are they referring to?
When you hear "the market is up" or "the market is down" in all likelihood, what people are referring to is how the main stock indices have performed in the referenced period.
A stock index is a numeric value that consists of the weighted average of the prices of its components. It is a simple and practical way to see how stocks (also called equities) have performed. If you read that the market was "up" that does not necessarily mean that all stocks were up but merely that in general it is likely that a stock has performed somewhat closely paralleling what the index that contains it has done.
When you hear "the market is up" or "the market is down" in all likelihood, what people are referring to is how the main stock indices have performed in the referenced period.
A stock index is a numeric value that consists of the weighted average of the prices of its components. It is a simple and practical way to see how stocks (also called equities) have performed. If you read that the market was "up" that does not necessarily mean that all stocks were up but merely that in general it is likely that a stock has performed somewhat closely paralleling what the index that contains it has done.
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