Stock Exchanges and Stock Market Indices

Question 1

What is a stock exchange?

Answer 1

• A place where financial instruments can be bought or sold.

Question 2

What are some of the purposes of a stock market indices?

Answer 2

• They provide a snapshot of how share prices are performing in a particular stock market.
• Measure price movements in markets across a number of different types of stocks.
• They calculate aggregate price movement of its targeted stocks on a daily basis or even on a real-time basis.
• They provide a single figure for ease of comparison

Question 3

What are some benefits of share indices?

Answer 3

• Allows investors to gauge the overall performance of the market.
• A stock market index will smooth out anomalies and provide a consistent picture of the mood across the market.
• Provides a benchmark for investors