A share price index tells you how well a particular segment of stocks is doing. Well-known indices include the Dow Jones Industrial Average, the S&P 500, and the Wilshire 5000. There are actually indices for almost every sector of the economy. You can track a share's index by using the most current stock prices and market divisors. Indices are also published online and in newspapers.
Market Cap Weighted Index
1. Find the market capitalization of each stock in the index by multiplying the price of the stock by the overall number of shares. For example, if a share is $5 and there are 500,000 of them, then 5 x 500,000 = $2.5 million market cap.
2. Add the market caps together.
3. Look up the official industrial averages divisor number, which is published daily in "The Wall Street Journal."
4. Divide the sum of the market caps by the divisor. The answer is the share index average.
Price Weighted Index Calculation
1. Look up the most current prices of the stock and write them down.
2. Add the stock prices together.
3. Divide the sum by the current Dow Jones divisor. The total is your index average.
Items you will need
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