Composite Index

DEFINITION of 'Composite Index'

A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time.

Also known simply as a "composite".

BREAKING DOWN 'Composite Index'

Usually, a composite index has a large number of factors which are averaged together to form a product representative of an overall market or sector. For example, the Nasdaq Composite index is a market capitalization-weighted grouping of approximately 5,000 stocks listed on the Nasdaq market. These indexes are useful tools for measuring and tracking price level changes to an entire stock market or sector. Therefore, they provide a useful benchmark against which to measure an investor's portfolio. The goal of a well diversified portfolio is usually to outperform the main composite indexes.

RELATED TERMS
  1. CBOE Nasdaq Volatility Index - ...

    A measure of market expectations of 30-day volatility for the ...
  2. Capped Index

    An equity index that has a limit on the weight of any single ...
  3. Index

    A statistical measure of change in an economy or a securities ...
  4. VIX - CBOE Volatility Index

    The ticker symbol for the Chicago Board Options Exchange (CBOE) ...
  5. OEX

    The ticker symbol used to identify index options traded on the ...
  6. Theoretical Dow Jones Index

    A method of calculating a Dow Jones index (most often the DJIA) ...
Related Articles
  1. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  2. Economics

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  3. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  4. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  5. Term

    Understanding Market Price and Its Changes

    An asset’s or service’s market price is the current price at which it can be bought and sold.
  6. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  7. Economics

    The History of Stock Exchanges

    Stock exchanges began with countries who sailed east in the 1600s, braving pirates and bad weather to find goods they could trade back home.
  8. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  9. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
  10. Fundamental Analysis

    5 Predictions for the Chinese Stock Market in 2016

    Find out why market analysts are making these five ominous predictions about the Chinese stock market in 2016, and how it may impact the entire world.
RELATED FAQS
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  4. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  5. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center