What is a stock index?

A stock index is a statistical indicator or number used to measure and report the value of a specific group of stocks. This index reports changes within market value of a set of stocks for different indexes such as the Dow Jones Industrial Average and Standard & Poor's 500.

A stock index tracks the market in different ways for different indexes. The method the index tracks and reports changes in market value depends on whether the index is narrow-based or broad-based. Another factor that decides how the stock index tracks market value is based on the averaging method used to establish the index.