An index that is composed of securities that represent the overall market. The index includes a sufficiently diverse set of stocks or other types of securities to reflect the movement of the market as a whole. Examples of broad-based indexes include the Down-Jones Industrial Average (DJIA), S&P 500, NASDAQ 100, DAX, Nikkei 225 Stock Index, and Wilshire 5000. Such indexes are used by investors to track the overall market performance. A broad-based index may also be compiled by holding the outstanding bonds in the Treasury, agency, corporate, and mortgage markets.
A broad-based index gauges investors’ sentiment regarding the state of the entire market, rather than a particular sector or industry.
