Question

what is a stock index?
a. the average change in a stock’s price over a given period.
b. an indicator of market strength based on the prices of several specific stocks.
c. a listing of all stocks available in a specific market.
d. the current number of stocks in your portfolio.

Explanation:

To determine the correct answer, we analyze each option:

• Option a: A stock index isn't just about the average change of one stock's price; it involves multiple stocks, so a is incorrect.
• Option b: A stock index (like S&P 500, Dow Jones) is indeed an indicator of market strength derived from the prices of a selected group of specific stocks. This matches the definition.
• Option c: A stock index isn't a listing of all stocks in a market; it's a weighted or unweighted measure of a subset of stocks, so c is wrong.
• Option d: A stock index has nothing to do with the number of stocks in an individual's portfolio, so d is incorrect.

Answer:

b. An indicator of market strength based on the prices of several specific stocks.