A stock index or stock market index is a measurement of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.
Two of the primary criteria of an index are that it is investable and transparent : the method of its construction should be clear. Many mutual funds and exchange-traded funds attempt to “track” an index (see index fund) with varying degrees of success. The difference between an index fund’s performance and the index is called tracking error