Courses : Intermediate Macroeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Trading Index The trade index is an indicator that measures the performance of the trade sector of a particular country or region within a certain period of time. This index covers all trading activities, both domestically and internationally, and includes the volume of goods and services traded, selling prices, and market conditions. Thus, the trade index can provide an overview of the performance of the trade sector in a country's economy and affect overall economic growth. The Trading Index is a statistical measure used to measure changes in the share prices of large companies traded on the stock exchange. Trading index is also often referred to as a stock index or stock market index. The trading index consists of a group of stocks of major companies representing different industries and sectors. The index can provide an overview of the performance of the stock market as a whole and can assist investors and analysts in evaluating the performance of their investment portfolios. Some of the well-known trading indices around the world include the S&P 500 and Dow Jones Industrial Average in the United States, the FTSE 100 in the UK, the Nikkei 225 in Japan, and the Shanghai Composite in China. Following are some of the characteristics of trading indices: 1. Measuring trading activity: A trading index is used to measure trading activity occurring at a particular time in a country or region. 2. Involves trade sector: Trade indexes usually cover specific trade sectors such as retail trade, wholesale, and e-commerce. 3. Can provide an overview of economic conditions: Trade indices can provide an overview of the economic conditions of a particular country or region. If the trading index shows an increase, then this can be a good signal for the economy. 4. Influenced by internal and external factors: Trade indices can be influenced by internal factors such as domestic economic and political conditions and external factors such as trade policies and global economic conditions. 5. Can affect exchange rates: Trade indices can affect the exchange rate of a country's currency. If the trade index shows an increase, the country's currency exchange rate tends to strengthen. 6. Can be used as an investment indicator: The trade index can also be used as an indicator to invest in a particular trading sector. The trading index has several important functions in economic activity, including: 1. Indicates the performance of the trading sector: The trade index is used to show the performance of the trading sector and distribution within a country or region. This helps in evaluating the performance of the sector and forecasting future trends. 2. Become a reference investment: Investors and market analysts use trading indices as the main indicator in making investment decisions. The rise and fall of the trading index can be a signal for investors to buy or sell shares in companies related to the trading sector. 3. Provide information for economic policy: Trade indexes can provide information needed by governments in setting economic policy. This data can be used to determine the appropriate expansion or reduction of the trade and distribution sector in the future. 4. Increase market transparency: Trading indices also help increase market transparency and provide information that is accessible to all parties. This information can help the general public, market players and financial institutions make better and more informed decisions. 5. Measuring economic growth: The Trade Index is used to measure a country's economic growth, especially in the trade sector. By monitoring trade indices, the government and central bank can determine the direction of economic growth and take appropriate actions to strengthen or slow down economic growth. 6. Predicting economic growth: Trade Indices can be used to predict future economic growth. If the trade index shows an increase, it can be assumed that economic growth will increase in the future. 7. Defining trade policies: Trade Indices can also be used by governments to determine appropriate trade policies. If the trade index shows a decline, the government may consider reducing import tariffs or increasing export tariffs to increase trade. 8. Monitoring economic stability: The Trade Index can be used to monitor a country's economic stability. If the trade index shows a significant decline, it can be a sign that economic stability is being threatened and urgent action is needed to overcome it. 9. Assessing the performance of the trade sector: The Trade Index can also be used to assess the performance of a country's trade sector. By looking at the trade index, it can be seen whether the trade sector is growing or experiencing stagnation. This can help the government and business people to make the right decisions in developing the trade sector. Here are some examples of commonly used trading indices: 1. Dow Jones Industrial Average (DJIA): This index includes the 30 largest stocks in the United States, including major companies such as Apple, Coca-Cola, and Goldman Sachs. 2. S&P 500: This index includes the 500 largest companies in the US and is considered an important indicator of the overall health of the stock market. 3. Nikkei 225: This index includes the 225 largest stocks traded on the Tokyo Stock Exchange and is used to represent the health of the Japanese economy. 4. FTSE 100: This index includes the 100 largest companies traded on the London Stock Exchange and is often used as an indicator of the health of the UK economy. 5. Shanghai Composite Index: This index includes all stocks listed on the Shanghai Stock Exchange and is an important indicator for the health of China's economy. 6. DAX 30: This index includes the 30 largest companies traded on the Frankfurt Stock Exchange and is considered an indicator of the health of the German economy. 7. Hang Seng Index: This index includes the 50 largest companies listed on the Hong Kong Stock Exchange and is used to represent the overall economic health of Hong Kong and China. These trading indices are used to track stock market movements and provide a snapshot of the health of the economy in a given country or region. This index can help investors and other financial decision makers to understand market trends and make smarter investment decisions.