An index is a system that measures the value of something in contrast to its previous value or another defined standard or benchmark. It can also be described as a financial instrument used to represent a group of individual prices or data points. An index is usually calculated as a single value of a series of prices and quantities over a specific period, making it a useful tool for tracking the price of a particular asset or basket of assets.

In financial markets, indices are often based on a list of various stock prices and are typically used to track the performance of the stock market, through a statistical measure of change - acting as a small sample that represents a large portion of the stock market as a whole. Each index follows a specific set of rules and calculation methodology, but ideally, variations in the value of an index should reflect the exact proportional changes in stocks. Therefore, a 5% change in a particular index should represent a 5% change, on average, of all the stock markets being considered in the calculation.