Understand market coverage
Follow these articles in order, or open any explanation on its own. Each step includes examples and a question to check your understanding.
Browse the full library →- Step 1 · Concept explained
What Is a Market Index?
A market index is a rules-based measurement of a selected group of securities. It summarizes a defined basket rather than every investment in the world, and its weighting and return rules shape the result.
- Step 2 · Concept explained
Percentages, Points and Basis Points
A percentage expresses a proportion or relative change. A percentage point measures the difference between two percentages. A basis point is one hundredth of a percentage point. These units describe different calculations.
- Step 3 · Term explained
What is market breadth?
Market breadth describes how widely a market move is shared across a defined group of stocks. It looks beyond the headline index to ask how many stocks are rising, falling or meeting another stated condition.
- Step 4 · Worked example
Why can an index rise while most stocks fall?
An index can rise while most of its stocks fall when the stocks that gain carry enough weight to outweigh the decliners. The number of winners and their influence on the index are separate parts of the calculation.
- Step 5 · Comparison
Cap weight vs. equal weight
A market-cap-weighted index gives larger equity market values more influence under its methodology. An equal-weighted index resets constituents to equal weights at scheduled rebalances. Different weights can produce different returns from the same companies.
- Step 6 · Term explained
What is relative performance?
Relative performance describes how one investment or index performed compared with a stated benchmark over the same period. An absolute gain can still be underperformance if the benchmark gained more.
- Step 7 · Concept explained
Sectors and Industries
Sectors and industries organize companies by business activity. A sector is a broad category; industries and sub-industries provide finer groupings. A market report’s sector results depend on the classification, universe and weighting used.
- Step 8 · Learning guide
How to read a market report
Start with the report's date and time window, then identify the benchmark, participation and leadership. Separate observed facts from proposed explanations, and finish by asking what evidence would change the interpretation.