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Article: A primer on U.S. stock price indices.(includes related article on the relationship between stock indices and the market)
- Article from:
- New England Economic Review
- Article date:
- November 1, 1998
- Author:
CopyrightCOPYRIGHT 1998 Federal Reserve Bank of Boston. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The measurement of the "average" price of common stocks is a matter of widespread interest. Investors want to know how "the market" is doing, and to be able to compare their returns with a meaningful benchmark. Money managers often have their compensation tied to performance, typically measured by comparing their results to a benchmark portfolio, so they and their clients are interested in the benchmark portfolio's returns. And policymakers want to judge the potential for sudden adjustments in stock prices when differences from "fundamental value" emerge.
The most widely quoted stock price index, the Dow Jones Industrial Average, has been supplemented by other ...