World indices: what each of them measures
· beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
An index is a basket with rules for selection and weighting. The rules differ between indices, and what they show depends on those rules.
Weighting
Most modern indices weight securities by capitalisation adjusted for free float. Large companies drive the performance.
There are indices weighted by the price of a single share — in those, an expensive security matters more regardless of company size. A historical construction that looks strange today and remains in use.
Coverage
Some indices include a few dozen of the largest companies, others thousands. The first show the behaviour of big business; the second come closer to the economy as a whole.
Price and total return
A price index excludes dividends; a total return index includes them. Over decades the gap is large, and a portfolio should be compared against the total return version — The benchmark: what to compare your result against honestly.
What this gives a Russian investor
Context. Knowing whether the local market is rising with the world or diverging from it explains events better than individual headlines.
Direct access to most foreign indices is currently restricted or comes with infrastructure risk — Restrictions and infrastructure risk: how it differs from market risk.
Related: The MOEX Russia Index: what it measures.
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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