FTSE and Dow Jones ??

[blingbling]

Can someone please explain to me what the Dow Jones is and the FTSE index is and why it makes the news every night.  How does it affect our day to day lifes? Ive been wanting to ask this question for years but thought it sounded too stupid to ask and that I should already know - Thanks

[Loosehead]

The indexes are a measure of financial preformance of the top company's. In the case of the FTSE it comprises a weighted average of the Top 100 companies in the UK. When the index was first formed it was set at 1000 and all the shares of all the companies where given a value based on the number and price of their shares and the values where set so they added up to 1000 using a weighted ratio. This now means that any fluctuations in the price of any of the shares from day 1 onwards (1980's I think) can be refelected as an index, ie you multiply the ratio value by the new price and that way the 1000 raises up and down. All the other indexes work the same way but they didn't necessarity start with the same base of 1000. As long as the base calculation is the same then the indexes througout the world give an indication of financial confidence.

[Andy008]

Go to www.investopedia.com

Will tell you everything you need to know.

[Andy008]

They are indices of the biggest firms as ranked by market capital i.e. the total value of all their issued shares. These can fluctuate hundreds of times daily, but you must remember that the markets are so huge that a change of just 0.2 or 0.3 % can equate to many millions of pounds in value. BP is currently valued at around �110 billion making it by some way the biggest company in Europe. Vodafone and HSBC are not far off.

It is fair to say that on all measures, market capital, employees, profit etc. lists of the world's biggest companies for the last 100 years will always include oil firms. They are the biggest and most powerful firms on earth by a long way - BP, Exxon Mobil, Chevron etc are all capable, if they so wished, of starting wars in developing countries.

There we go, aren't I clever!

[acw]

In addition to the information provided above. 

The health of stock exchanges reflects in part the health of the economy in that country.  This is because, the more money people have spare, the more shares they will buy, and so the indices rise. 

People are interested in the health of the indices because of their use as this type of indicator.  Clearly it's not thrilling for everyone, but then neither's the news about the golf!!! 

It's not so much that the markets affect our lives, as that things that affect our lives also affect the indices. 

PS - In the US in 1929, the stock markets plunged before the depression hit.  This is an example of what it shows.