A composite, or composite index, is an aggregation of components to produce a broad statistical measure. A stock index, for example, is a composite index as it combines individual stock prices to produce one number that represents the market as a whole. The technique used to calculate the composite number varies; a composite may add values together and apply a multiplier, it may add values together while applying different weights to different components, or it may simply average all the values together.
Composites are not limited to stock markets. There are composite indexes for bonds, corporate debt and currency exchange rates. Many economic indicators such as the Consumer Price Index are composite indices. There are even composite indices of composite indices, such as the widely reported Index of Leading Economic Indicators. Benchmarking of professional money managers is often done against a composite. Mutual-fund managers, for example, may have their performance measured relative to the S&P 500 Index. |
