Indices reflect the average price levels of a select group of exchange-traded securities. The fluctuations in share price indices reflect the rate of return on investment in them and measure the outcome of the investment for better (gains) or for worse (losses), both in real time throughout the trading day and over time.
On the day an index is launched a base price (in points) is set. Fluctuations in share prices are added/subtracted from the base price in accordance with the shares' respective weights in the index. The price level of the index reflects the sum total of changes in the index's constituent shares.
For example, assuming that:
- the index price is 100
- the weight of a given constituent share is 5%
- the share lost 50% of its value on a certain day
- all other share prices in the index remained constant
- In this case the index lost 2.5% (50% X 5%), resulting in a price level of 97.5
