I've noticed people often ask about stock indices, so I want to share our understanding.

What exactly is a stock index? It's a measure that helps us see the overall direction of the stock market. Instead of looking at each stock individually, just by checking the index, we can tell whether the market is going up or down. In Thailand, we commonly use SET, SET50, and SET100.

The key point is that a stock index is not just a random number. It is calculated from a specific group of selected stocks, using a standardized method to measure performance.

Regarding the calculation methods, there are three main types.

The first type is a price-weighted index. Stocks with higher prices have more influence on the index, regardless of the company's size. The Dow Jones Industrial Average and Nikkei 225 are examples of this type.

The second type is a market capitalization-weighted index. Here, the market value (Market Cap) of each company is considered, so larger companies have a greater impact on the index. The S&P 500 and Hang Seng are classic examples.

The third type is an equal-weighted index, or sometimes called a non-weighted index. In this case, all stocks have the same impact, whether their prices are high or low, large or small. Price changes are based on the percentage return of each stock.

Understanding what a stock index is helps us analyze the market better, whether we're investors or just following economic news.