Why is the Dow Jones Average an index? How does the Dow Jones relate to the Nikkei index? What is the relationship between an index and the inflation rate?
In reading about the Dow Jones which is an index that averages out the performance of 30 stocks within the various markets. Now each one of these 30 stocks lies in one of the country’s major industries and illustrates the changes within the stock prices and how it relates and effects the rest of the economy or stock market. Dow Jones can be used as a benchmark so that they can compare other stocks and evaluate whether or not they are doing better within the market. This also allows them to see the market trends and identify them easier. In discussing the Nikkei index which is Japan’s version of the Dow Jones Average which accounts for 225 stocks in a variety of industries unlike the 30 that the Dow Jones averages. There are indexes for just about anything in the world today and it is important to note that all indexes are not related to inflation. When we think about indexes we find that the Consumer Price index is one that identifies trends and shows if the market prices effect the dollar. Furthermore, the Fog Index which is used to make and show averages about literary works within those markets.
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