Because it is difficult to track the performance of each stock one by one, the market began to select some representative stocks to calculate and form a stock index. With the development of financial markets, stock exchanges all over the world have launched their own large-scale indexes, and then developed stock indexes for different fields or regions, such as small enterprise indexes, industry indexes, and even emerging countries or regions, trying to show the stock market changes in various regions and markets with different combinations.
In terms of types, the largest stock index category is non-global index. Global stock index includes important stocks in important global stock markets, trying to capture the changes of global stock markets for investors in different ways, such as MSCI World and S&; P Global 100, etc. Of course, almost all countries with securities markets have a major market index, while countries with large securities markets even have several major stock indexes, such as Dow Jones Industrial Index, S&P 500 Index and Nasdaq in the United States, and China also has Shanghai Composite Index, Shenzhen Composite Index and Hang Seng Index.
In addition, stock markets in various countries also produce other types of stock indexes, which are distinguished by the size of enterprises, industries or regions. For example, Hang Seng Index includes hang seng china enterprises index, Hang Seng Hong Kong China Enterprise Index, Hang Seng China H-share Financial Industry Index, Hang Seng China Mainland 100, Hang Seng China Mainland 25, Hang Seng Hong Kong 35 and Hang Seng Real Estate Fund Index.
In Europe, due to the great mutual influence of the financial systems of various countries, some indexes try to aggregate the European stock market into different indexes, such as the Stoxx Europe 600 Index 600, which includes the 600 most important stocks in 18 countries, and the Stoxx Europe 50 Index, which includes 50 major blue chips in the euro zone.
Morgan Stanley Capital International (MSCI) divides global stock markets into developed countries and developing countries, such as MSCI G7 Index, MSCI Euro Zone Index, MSCI North America Index and MSCI Emerging Markets Index.
The statistical methods used by each stock index are also different. The simplest method is the price weighting method, which is used to calculate the Dow Jones Industrial Average. Because the price weighting method does not consider the market value or scale of the enterprise, it is relatively affected by the price changes of individual stocks. The market value weighting method is another commonly used statistical method, and the Hang Seng Index is one of them. In the market value weighting method, the change of stock price with large market value has great influence on the index.
Other algorithms include market share weighting method and attribute weighting method. The market share weighting method is measured by the number of shares issued, and the attribute weighting method takes multiple selected attributes as the weighting standard. For example, the S&P net growth index (S&; P pure growth style index) and S&P pure value index (S&; P pure value style index) belongs to the attribute weight index, and individual stocks are given scores and weights with the selected style attributes.
Moreover, index funds in the same fund, especially ETFs, are all passive management operations, with the purpose of copying stock indexes. Stock index futures derived from stock index-based assets are important hedging tools in financial markets.