Statistics Statistics (from German: '' Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, indust ...

Economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

and

Finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

, an index is a statistical measure of change in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from different perspectives. Influential global financial indices such as the Global Dow, and the NASDAQ Composite track the performance of selected large and powerful companies in order to evaluate and predict economic trends. The

Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity inde ...

and the

S&P 500 The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of ...

primarily track U.S. markets, though some legacy international companies are included. The

consumer price index A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. Overview A CPI is a statisti ...

tracks the variation in prices for different consumer goods and services over time in a constant geographical location and is integral to calculations used to adjust salaries, bond interest rates, and tax thresholds for inflation. The GDP Deflator Index, or real GDP, measures the level of prices of all-new, domestically produced, final goods and services in an economy. Market performance indices include the labour market index/ job index and proprietary

stock market index In finance, a stock index, or stock market index, is an index that measures a stock market, or a subset of the stock market, that helps investors compare current stock price levels with past prices to calculate market performance. Two of th ...

investment instruments offered by

brokerage house A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be conf ...

s. Some indices display market variations. For example, the

Economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

provides a

Big Mac Index The Big Mac Index is a price index published since 1986 by ''The Economist'' as an informal way of measuring the purchasing power parity (PPP) between two currencies and providing a test of the extent to which market exchange rates result ...

that expresses the adjusted cost of a globally ubiquitous Big Mac as a percentage over or under the cost of a Big Mac in the U.S. in USD (estimated: $3.57). The least relatively expensive Big Mac price occurs in Hong Kong, at a 52% reduction from U.S. prices, or $1.71 U.S. Such indices can be used to help forecast currency values.

Index numbers

An index number is an

economic data Economic data are data describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period (say the monthly unemployment rate for the last five years) or in cross-sectional dat ...

figure reflecting

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

or quantity compared with a standard or base value. The base usually equals 100 and the index number is usually expressed as 100 times the

ratio In mathematics, a ratio shows how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8:6, which is equivalent to the ...

to the base value. For example, if a

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

costs twice as much in 1970 as it did in 1960, its index number would be 200 relative to 1960. Index numbers are used especially to compare business activity, the cost of living, and

employment Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...

. They enable economists to reduce unwieldy business data into easily understood terms. In

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

, Index numbers generally are

time series In mathematics, a time series is a series of data points indexed (or listed or graphed) in time order. Most commonly, a time series is a sequence taken at successive equally spaced points in time. Thus it is a sequence of discrete-time data. Ex ...

summarizing movements in a group of related variables. The best-known index number is the

, which measures changes in retail prices paid by consumers. In addition, a

cost-of-living index A cost-of-living index is a theoretical price index that measures relative cost of living over time or regions. It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as pr ...

(COLI) is a price index number that measures the relative cost of living over time.Turvey, Ralph. (2004)
Consumer Price Index Manual: Theory And Practice.
' Page 11. Publisher:

International Labour Organization The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is the first and o ...

. . In contrast to a COLI based on the true but unknown utility function, a superlative index number is an index number that can be calculated. Thus, superlative index numbers are used to provide a fairly close approximation to the underlying cost-of-living index number in a wide range of circumstances. Some indexes are not time series. Spatial indexes summarize real estate prices, or toxins in the environment, or availability of services, across geographic locations. Indexes may also be used to summarize comparisons between distributions of data within categories. For example,

purchasing power parity Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a bask ...

comparisons of currencies are often constructed with indexes. There is a substantial body of economic analysis concerning the construction of index numbers, desirable properties of index numbers and the relationship between index numbers and economic theory. A number indicating a change in magnitude, as of price, wage, employment, or production shifts, relative to the magnitude at a specified point usually taken as 100.

Index number problem

The index number problem is the term used by economists to describe the limitation of statistical indexing, when used as a measurement for cost-of-living increases. For example, in the Consumer Price Index, a reference year's "market basket" is assigned an index number of 100. In 2019 if a market basket price is 55 and the basket were to double the following year, in 2020, then the index would rise to 200. This is done by performing a simple calculation: Dividing the new year market basket price by the reference year's (otherwise known as the base year) price, and subsequently multiplying the quotient by 100. While the CPI is a conventional method to measure inflation, it doesn't express how price changes directly affect all consumer purchases of goods and services. It either understates or overstates cost-of-living increases. This is the limitation of the CPI that is described as the index number problem. There is no theoretically ideal solution to this problem. In practice for retail price indices, the "basket of goods" is updated incrementally every few years to reflect changes. Nevertheless, the fact remains that many economic indices taken over the long term are not really like-for-like comparisons and this is an issue taken into account by researchers in

economic history Economic history is the academic learning of economies or economic events of the past. Research is conducted using a combination of historical methods, statistical methods and the application of economic theory to historical situations and i ...

Indices

Provider: Dow Jones *

Provider:

Standard & Poor's S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is con ...

* S&P 400 * S&P 600 * S&P 1500 * S&P/ASX 200 * S&P/TSX Composite Index * S&P Global 1200 * S&P Custom Group of indices * S&P Leveraged Loan Index * Case–Shiller index Provider: Russell Investments * Russell 1000 Index *

Russell 2000 Index The Russell 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the Lon ...

* Russell 3000 Index * Russell Midcap Index * Russell Microcap Index * Russell Global Index * Russell Developed Index * Russell Europe Index * Russell Asia Pacific Index * Russell Emerging Markets Index Provider:

FTSE Group FTSE International Limited trading as FTSE Russell ( "Footsie") is a British provider of stock market indices and associated data services, wholly owned by the London Stock Exchange (LSE) and operating from premises in Canary Wharf. It operate ...

FTSE 100 Index The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the "Footsie" , is a share index of the 100 companies listed on the London Stock Exchange with (in principle) the highest marke ...

FTSE 250 Index The FTSE 250 Index ( "Footsie") is a capitalisation-weighted index consisting of the 101st to the 350th largest companies listed on the London Stock Exchange. Promotions and demotions to and from the index occur quarterly in March, June, Septem ...

* FTSE 350 Index * FTSE AIM UK 50 Index *

FTSE All-Share Index The FTSE All-Share Index, originally known as the FTSE Actuaries All Share Index, is a capitalisation-weighted index, comprising around 600 of more than 2,000 companies traded on the London Stock Exchange (LSE). Since 29 December 2017 the constitu ...

FTSE/Athex Large Cap The FTSE/Athex Large Cap is the stock index of the twenty-five largest companies on the Athens Stock Exchange. the stocks comprising this index are: Viohalco, Coca-Cola HBC AG, EYDAP, Terna Energy, Lamda Development S.A., Hellenic Petr ...

* FTSE Bursa Malaysia Index * FTSE Fledgling Index * FTSE Italia Mid Cap * FTSE MIB *

FTSE SmallCap Index The FTSE SmallCap Index is an index of small market capitalisation companies consisting of the 351st to the 619th largest-listed companies on the London Stock Exchange main market. The index, which is maintained by FTSE Russell, a subsidiary of ...

* FTSE techMARK 100 * FTSE4Good Index * FTSEurofirst 300 Index Provider: STOXX Limited * EURO STOXX 50 * STOXX Europe 50 *

STOXX Europe 600 The STOXX Europe 600, also called STOXX 600, SXXP, is a stock index of European stocks designed by STOXX, STOXX Ltd. This index has a fixed number of 600 components representing large, mid and small capitalization companies among 17 European count ...

* STOXX Global 1800 Provider:

Morgan Stanley Capital International MSCI Inc. is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, ESG and climate products. It operates the MSCI World, MSCI A ...

* MSCI World Index * MSCI EAFE (Europe, Australasia, and Far East) Index Provider: Bombay Stock Exchange * BSE SENSEX Provider:

Reuters Reuters ( ) is a news agency owned by Thomson Reuters Corporation. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide. Reuters is one of the largest news agencies in the world. The agency was est ...

* Reuters-CRB Commodities Index Provider: Markit * ABX *

CDX The Cdx gene family, also called caudal genes, are a group of genes found in many animal genomes. Cdx genes contain a homeobox DNA sequence and code for proteins that act as transcription factors. The gene after which the gene family is named (the ...

/ iTraxx * CMBX Provider: Historic Automobile Group * HAGI Top Index Provider: CRYX * CRYX5 * CRYX10 * CRYX25 * CRYX50 * CRYX100

References

External links

Humboldt Economic Index

Lars Kroijer

SG IndexDow Jones Indexes
{{DEFAULTSORT:Index (Economics) Business terms Economic growth Economic indicators Mathematical and quantitative methods (economics)

Index numbers

Index number problem

Indices

See also

References

Further reading

External links