Indexes began almost fortuitously when a lawyer named Henry Varnum Poor decided to publish a listing of companies laying railroad tracks in 1860. Several years later, Charles Dow – a journalist – measured the average value of the top 12 companies traded on the New York Stock Exchange. Poor’s efforts led to Standards & Poor’s S&P, while Dow created the Wall Street Journal and the Dow Jones Industrial Average.

Today, nearly every stock exchange is regularly measured by either an outside agency or an internally associated entity, like the Nasdaq. The London Stock Exchange’s index is published by the FTSE – the Financial Times Stock Exchange Group. And THAT group which is a joint collaboration of the Financial Times newspaper and the London Stock Exchange Group, which also owns the Italian Bourse and shares in the Indian Stock Exchange.

And, we should remember that what’s measured is the choice of the measurer. And so, Dow Jones’ EuroStoxx 50 measures the top 50 blue chip companies located throughout the European union – not on a specific exchange. The Nasdaq-100 measures only tech companies, and so on.

The MANNER of measuring also differs from one index to another.

In a price-weighted index, a stock worth $100 will account for 2 times more of the average than a stock worth $50. In a capitalization-weighted average, a company’s entire market-cap is taken into account – that’s the number of shares out there, times their value.

The DowJones-30 and Nikkei are price-weighted. After selecting the top companies, the index-makers only measure the value of the share without measuring the company size or market capitalization. Market-cap indexes include the S&P500, the FTS, the French CAC and German DAX.

Inclusion is also far from universal. Usually, what shares are included are decided upon by a committee. A company needs to fulfil a set of requirements – market capitalization, size and so forth. Usually, the requirements are a given. With the Dow Jones, though, it’s the top companies in the economy. And that definition is entirely at the whim of the committee members.

One final thing before we go: the plural of index. Type indexes into Google and indices, and you’ll actually get 11 billion hits for the former, half a billion for the latter. Despite that, most people dealing in financial markets prefer indices. Maybe because it’s Latin.