INDEX DEFINITION AND CALCULATIONS OF VALUE AND RETURNS

• A security market index represents a given security market, market segment, or asset class.
•  Most indices are constructed as portfolios of marketable securities.
• The value of an index is calculated on a regular basis using either the actual or estimated market prices of the individual securities, known as constituent securities,within the index.
• For each security market index, investors may encounter two versions of the same index (i.e., an index with identical constituent securities and weights):one version based on price return and one version based on total return. 
• As the name suggests, a price return index, also known as a price index, reflects only the prices 

ORIGIN OF MARKET INDICES

Investors had access to regularly published data on individual security prices in London
as early as 1698, but nearly 200 years passed before they had access to a simple indica￾tor to reflect security market information.1 To give readers a sense of how the US stock
market in general performed on a given day, publishers Charles H. Dow and Edward
D. Jones introduced the Dow Jones Average, the world’s first security market index, in
1884.2 The index, which appeared in The Customers’ Afternoon Letter, consisted of the
stocks of nine railroads and two industrial companies. It eventually became the Dow
Jones Transportation Average.3 Convinced that industrial companies, rather than rail￾roads, would be “the great speculative market” of the future, Dow and Jones introduced
a second index in May 1896—the Dow Jones Industrial Average (DJIA). It had an initial
value of 40.94 and consisted of 12 stocks from major US industries.4,5 Today, investors
can choose from among thousands of indices to measure and monitor different security
markets and asset classes.

Listing of securities

Listing of securities means  that the securities are admitted for trading in recognized Stock Exchange. Transactions in securities of any company  cannot  be conducted on  stock exchanges unless they are listed by them.