An index is a measurement of the price performance of a group of securities in an asset class or a market. It consists of a portfolio of securities that represent a particular market or a section of it, and its value is calculated as a weighted average of the prices or market capitalization (in the case of stocks) of its constituent securities.
The market, here, can be the stock market, bond market, forex market, or commodity market. So, we have stock market indices, like the S&P 500 Index and the FTSE 100; the bond market indices, such as the U.S. Aggregate Bond Index; the currency market indices, such as the USD Index and the Euro Index; and the commodity market indices, like the S&P Commodity Index and the Rogers International Commodities Index.
However, stock market indices are, by far, the most common indices in the financial market. They are the indices that financial analysts talk about most of the time, and most online brokers offer their CFDs for retail trading. So, for the rest of this article, we will focus on the stock market indices.
A stock index is a statistical measure of the performance of a group of stocks listed on a particular stock exchange. Depending on the constituent stocks, an equity index may represent a section of the stock market or the whole of it.