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Presentation of Content On an exchange that averages $40 billion in daily trades like the NYSE, upward and downward movements of stocks mean gains or losses of billions of dollars in wealth. The total dollar value of shares traded is called dollar volume ; the total number of shares traded is called share volume . Every movement of the stock market is monitored, scrutinized, and analyzed. Just like test scores are indicators of students’ progress, price fluctuations of the whole market or segment of the market can signal potential problems , like an overvaluation of shares, or reveal opportunities , such as undervaluation of shares. The Stock Index As students observed in the last lesson, the price of a single share of stock is easy to track. Just check the stock quote. But the performance of a single stock is not an indicator of the performance of the market as a whole , or even a segment of the market, any more than the test score of one student is an indicator of how all students in a class, school, district, or state are doing. How is the market, in whole or in part, tracked and measured? The stock index! A stock index is a method of tracking and measuring the ups and downs of the stock market as a whole, or a particular section of the market . Indexes are made up of a kind of imaginary portfolio of stocks selected on a variety of criteria. The companies contained in the index portfolio are called index components . Price changes of the component stocks are tracked and averaged to provide investors, economists, and just about anyone who is curious about the market with: a quick snapshot of market performance an indicator of stock market trends (Is the market in an upward trend or heading down?) a comparison the performance of diverse segments of the U.S. and international markets Let’s Interpret a Stock Index! Engage students in a discussion: Have you ever noticed something that looks like this running across the bottom of the TV or computer screen? DJIA 17,802.42 24.27 (0.14%) What does it mean? DJIA 17,802.42 24.27 (0.14%) A DJIA is the ticker symbol for The Dow Jones Industrial Average . It is a famous stock index which we’ll learn more about later in this lesson. The DJIA is made up of about 30 stocks. B The large number (17,802.42) is representative of the sum of the current prices of the stocks that make up the DJIA index . Every stock index has its own unique formula for calculating the sum of the stocks (components) in its portfolio. C The arrow or indicates whether the prices of the stocks contained in that index are, on average , up or down from their last calculation. SLIDE 16H A B C D E PRODUCT PREVIEW
303 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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