ETFs and indices · updated October 21, 2026
What is a stock market index and how is it calculated
A stock market index is a basket of stocks chosen by fixed rules, whose level shows how a market or a sector is doing. The S&P 500 tracks the 500 largest US companies; the BET tracks the most traded companies on the Bucharest Stock Exchange.
The stock market index formula
- Freely available shares
- Only the shares that can trade freely, excluding those held by governments or founders (free float).
- The divisor
- A number the index provider adjusts so the level does not jump when companies enter or leave.
Worth knowing
Most indices are weighted by market cap: a big company counts more. In the S&P 500, the top 10 companies make up about a third of the index.
When the stock market index can fool you
You cannot buy an index directly: you buy it through an ETF or a fund that copies it.
Related terms
Questions about the stock market index
What are the best-known indices?
The S&P 500, Nasdaq 100 and Dow Jones in the US, the DAX in Germany, the FTSE 100 in the UK, the Euro Stoxx 50 in the eurozone and the BET in Romania.
Why does an index change its members?
Because companies grow and shrink. From time to time, those that no longer meet the rules leave and others come in.
These explanations are for information only. They are not a recommendation to buy or sell.
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