Base Year

What is a 'Base Year'

A base year is the first of a series of years in an economic or financial index. A base year is normally set to an arbitrary level of 100. Any year can be chosen as a base year, but typically recent years are chosen. New, more up-to-date base years are periodically introduced to keep data current in a particular index.

BREAKING DOWN 'Base Year'

A base year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes (either rising or falling) can be easily depicted. For example, to find that rate of inflation (or any other economic index) between 2005 and 2010, one would make calculations using 2005 as the base year, or the first year in the time set.

RELATED TERMS
  1. Reference Base Period

    A year in which the Consumer Price Index is equal to 100, a reference ...
  2. Interest Rate Index

    An index that is based on the interest rate of a financial instrument ...
  3. Basing

    A period in which a stock or other traded security is showing ...
  4. Base Period

    A particular time period for which data is gathered and used ...
  5. Fundamentally Weighted Index

    A type of equity index in which components are chosen based on ...
  6. Basing Point

    A specific location used in the basing point pricing system. ...
Related Articles
  1. Markets

    Standard And Poor's 500 Index

    Learn about this index of index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors.
  2. Investing Basics

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.
  3. Professionals

    Price Based Options

    Priced based options are used by investors to speculate on or to hedge against a change in Treasury securities’ prices. As interest rates change, the prices of Treasury securities will ...
  4. Investing Basics

    The Pros and Cons of Indexes

    Learn about the advantages and disadvantages of stock indexes and passive index funds. Discover how there is an opportunity cost to using index funds.
  5. Professionals

    Rate Based Options

    An investor may speculate on interest rates or hedge a portfolio by using rate based options. Rate based options are open for trading, based on the most recently issued Treasury bill, note and ...
  6. Professionals

    Index, Interest Rate And Currency Options

    Series 4
  7. Options & Futures

    Index Options: A How-To Guide

    Index options, financial derivatives that derive their value from a stock index, can provide stability and peace of mind for less risky investors.
  8. Taxes

    Explaining the Tax Base

    A tax base is the value of assets, investments or income streams that a government can tax.
  9. Professionals

    Active vs. Passive Portfolio Styles

    NASAA Series 65: Section 12 Active vs. Passive Portfolio Styles. In this section portfolio management compares actively managed and passively managed portfolios. Top up, bottom down, efficient ...
  10. Professionals

    Average Market Returns

    We look at the major indexes and their average yearly returns.
RELATED FAQS
  1. In economics, what is an index number?

    Read about the role of an index number in economics and how index numbers can be applied to all kinds of data, such as inflation ... Read Answer >>
  2. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
  3. What are the most important equity market indexes?

    Discover the most important equity market indexes. Stock market indexes are tools to evaluate the performance of the stock ... Read Answer >>
  4. What are the main trading signals on the Accumulated Swing Index?

    See what kind of trading signals technical analysts use based on the accumulative swing index for a particular trading instrument. Read Answer >>
  5. What is the relationship between the PPI and the CPI?

    First, let's take a look at what these two acronyms mean: the PPI is the producer price index and the CPI is the consumer ... Read Answer >>
  6. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center