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Stock index

An index is a weighted indicator that summarises the price performance of a selected group of stocks in a single number. A stock index weights the prices of stocks selected under set rules to show the direction of the market or a segment of it.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • Borsa Istanbul calculates hundreds of indices such as BIST 100, BIST 30, BIST All and sector indices; funds and ETFs use them as benchmarks.
  • A rising index shows the market gaining value overall, though a few large stocks can drive it.
  • a price index excludes dividends; a total return index gives a fairer comparison.

Formula / calculation

Index value = Σ (Share price × Free-float shares) / Divisor. The divisor is adjusted to keep continuity through constituent or capital changes. BIST indices are free-float market-cap weighted; price-weighted (Dow Jones) and equal-weighted indices also exist.

Interpretation

A rising index shows the market gaining value overall, though a few large stocks can drive it. Investors measure their own performance by comparing portfolio returns with the index.

Pitfalls

a price index excludes dividends; a total return index gives a fairer comparison. A USD-based index can behave very differently from the TL-based one. Inclusion and exclusion events affect the prices of affected stocks.

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Frequently asked questions

An index is a weighted indicator that summarises the price performance of a selected group of stocks in a single number.

Index value = Σ (Share price × Free-float shares) / Divisor. The divisor is adjusted to keep continuity through constituent or capital changes. BIST indices are free-float market-cap weighted; price-weighted (Dow Jones) and equal-weighted indices also exist.

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