An index number is an economic data figure reflecting price or quantity compared with

a standard or base value.[1][2] The base usually equals 100 and the index number is usually
expressed as 100 times the ratio to the base value. For example, if a commodity costs
twice as much in 1970 as it did in 1960, its index number would be 200 relative to 1960.
Index numbers are used especially to compare business activity, the cost of living, and
employment. They enable economists to reduce unwieldy business data into easily
understood terms.

In economics, index numbers generally are time series summarising movements in a

group of related variables. In some cases, however, index numbers may compare
geographic areas at a point in time. An example is a country's purchasing power parity.
The best-known index number is the consumer price index, which measures changes in
retail prices paid by consumers. In addition, a cost-of-living index (COLI) is a price index
number that measures relative cost of living over time.[3] In contrast to a COLI based on
the true but unknown utility function, a superlative index number is an index number that
can be calculated.[3] Thus, superlative index numbers are used to provide a fairly close
approximation to the underlying cost-of-living index number in a wide range of
circumstances.[3]

There is a substantial body of economic analysis concerning the construction of index

numbers, desirable properties of index numbers and the relationship between index
numbers and economic theory.

Index (economics)

In economics and finance, an index is a single number calculated from a set of prices or
of quantities[citation needed]. Examples include the price index, quantity indexes (such as real
GDP), market performance indexes (such as a labour market index / job Index and stock
market indexes). Values of the index in successive periods (days, years, etc.) summarize
level of the activity over time or across economic units (regions, countries, etc.)[citation
needed]
.

In financial markets, an index is a customized basket of securities that tracks a particular

market or segment. Each index has its own calculation methodology and its own specific
process in order to select particular securities. Some companies (S&P, Dow Jones
Indexes, SG Index, STOXX) have created a lot of indices to replicate different markets or
selected industries. S&P is one of the most known index provider with the S&P 500. It
offers a wide range of indices like the S&P Asian Index which measures the equity
market of a basket of Asian countries (India, Economy of the People's Republic of China,
Hong Kong, Taiwan, Korea and Singapore). Dow Jones Indexes provide a range of
indices like the world oldest, and very famous, Dow Jones Industrial Average. It provides
also an index which measures the stock performances of 50 leading multinational
companies. SG Index, established in 2007, is a new provider of indices who provides data
used by a number of financial products. One of the most famous index is the SGI Wise
Index, that provides an exposure to European equities.

The Operating Index is a tool to measure a company's performance on a financial metric

and compare it with the median or average performance of that metric in a Peer universe
over a period of time.

Consumer price indexes can be used, among other things to adjust salaries, bonds interest
rates, and tax thresholds for inflation.

Some investment funds (index funds) manage their portfolio so that their performance
mirrors (tracking) the performance of a stock market index or a sector of the stock
market[citation needed].

n.
A number indicating change in magnitude, as of price, wage, employment, or production
shifts, relative to the magnitude at a specified point usually taken as 100.

A measure of the value of a variable relative to its value at some base date or state (the
base period). The index is often scaled so that its base value is 100. Such an index may be
described as a base-weighted index.

Figures which show the relative change in one or more variables over time. The value of
the variable for one particular year is chosen to be the base value, expressed as 100. The
figures for the other years are then expressed as a percentage of the figure for the base
year. For the economic geographer, for example, index numbers provide an easy way of
comparing figures such as food production per capita, relating all production to one base
year.

index number, in econometrics, a figure reflecting a change in value or quantity as

compared with a standard or base. The base usually equals 100 and the index number is
usually expressed as a percentage. For example, if a commodity cost twice as much in
1970 as it did in 1960, its index number would be 200 relative to 1960. Index numbers
are used especially to compare business activity, the cost of living, and employment; one
of the most influential indexes in the United States is the Consumer Price Index (see
under cost of living). Index numbers enable economists to reduce unwieldy business data
into easily understood terms.

Bibliography

See R. Marris, Economic Arithmetic (1958).

Abstract
Index numbers are used to aggregate detailed information on prices
and quantities into
scalar measures of price and quantity levels or their growth. The paper
reviews four main
approaches to bilateral index number theory where two price and
quantity vectors are to
be aggregated: fixed basket and average of fixed baskets, stochastic,
test or axiomatic and
economic approaches. The paper also considers multilateral index
number theory where
it is necessary to construct price and quantity aggregates for more
than two value
aggregates. A final section notes some of the recent literature on
related aspects of index
number theory the construction of indexes when there is seasonality in
the underlying
data, sources of bias in consumer price indexes, the use of index
numbers in measuring
productivity, the problem of quality change and index number theory
that is based on
taking differences rather than ratios.
Journal of