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Originally Posted by Looger
well i'd call the DOW industrial average an index, but isn't it just the top 100? does it really reflect the whole market or just the cream of the crop?
and if the currency involved has doubled in 6 years, doesn't a number of 11000 really mean something like 5500?
another indicator would be the housing market, and i hear that massachussets and texas have reported major losses in property value.
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For sure, you need to look at everything.
The currency doubling in 6 years is interesting, but I don't think they are sticking that in their matress. It will be going somewhere.
Indexes can be created for different purposes. Often the stocks are chosen to be active representations of the market segments they are involved in (hi-tech, precious metals etc). You can attempt to choose "cream of the crop" stocks to be your index, but I'm not sure how much use something like that would be? Wikipedia has an excellent
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A stock market index is a listing of stocks and a statistic reflecting the composite value of its components. It is used as a tool to represent the characteristics of its component stocks, all of which bear some commonality such as trading on the same stock market exchange, belonging to the same industry, or having similar market capitalizations. Many indices compiled by news or financial services firms are used to benchmark the performance of portfolios such as mutual funds.
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