An index is a statistical measure that tracks the performance of a group of assets, typically stocks, bonds, commodities, or other financial instruments. Indices serve as benchmarks for investment performance, underlying assets for derivatives, and indicators of market or economic conditions. Major indices include S&P 500, FTSE 100, and commodity indices like the CRB Index.

Index construction involves selection criteria, weighting methods (market cap, price, or equal weighting), and rebalancing schedules. Indices enable passive investment strategies through index funds and ETFs while providing standardized performance comparisons. Understanding index methodology is crucial for traders using index-based products or measuring relative performance.

Real-world example: The S&P 500 index tracks 500 large U.S. companies by market capitalisation, serving as a benchmark for U.S. equity performance and underlying asset for trillions of dollars in index funds and derivatives.