Answer Posted / krushna chandra swain (guntha
an index is a device that measures changes in the prices of
a basket of shares, and represents the changes using a
single figure. The purpose is to give investors an easy way
to see the general direction of the market or shares in the
index. The FTSE 100, for example, is calculated by taking a
weighted average of the share prices of the largest 100
companies on the London Stock Exchange. Launched in 1984
with a base figure of 1000, the FTSE is calculated
continuously throughout the trading day. When the media
report that FTSE climbed 37 points today you dont know
exactly which shares in the index climbed and which fell,
but you get an immediate idea of the direction of the
market. Index funds base their investment decisions on
tracking the companies in a particular index.
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