Index

1. In finance, index refers to a statistical method to measure a section of the financial market. This can range from interest rates to stock market indices. The percentage change in interest rates is usually more important than its actual number. Since indices are imaginary portfolios of securities, an investor usually needs to invest in an index fund to track the performance of an index.

2.In economics, index refers to a statistical measure of a certain aspect of the economy. This may be inflation (measured by the Consumer Price Index) or other things like unemployment. Changes in indices can reflect shifts in the economy, however the actual calculation of an index is a complicated matter as well. For example, how to decide the weighting of different goods in calculating the CPI(how big% should be allocated to food, how much to gas and so on). Therefore there is always the possibility that an index does not accurately reflect what’s going on in the economy.

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