How to calculate stock exchange index?
This really depends on what kind of stock exchange you’re talking about and what kind of computation system that stock exchange uses. For example, the Dow Jones Industrial aVg and Nikkei 225 use the price-weighted index method but the most common type used is the value weighted index method. The value-weighted index is generated by deriving the initial total marker value of all stocks used in the index (Mkt value = No. of shares outstanding * current market price). Then, a new market value is computed for all securities in the index, and the current market value is comapred to the initial “base” market value to determine the percentage of change, which in turn is applied to the beginning index value.
