CHAPTER 2

A Short History of Indexes

From a newspaper average to the core of world investing

Opening question

“Index funds seem to be everywhere now. Who invented them, and why did it take so long for an idea this simple to reach ordinary investors like me?”

In this chapter

Charles Dow's averages and why the first indexes were price-weighted
How market-value indexes, computers and data made modern indexes possible
The academic ideas that turned indexes into an investment strategy
The first index portfolios, the first retail index fund and the first ETFs
Index futures and options: when the index itself became tradable
Global index providers, smart beta, ESG and thematic indexes
Index investing arrives in Vietnam and Asia, from the VN-Index to the FTSE Russell upgrade
A milestone table linking history to the products you can buy today

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 2 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).

Read Chapter 1 free Get the full book — contact@nxw.vn

Sections of this chapter

2.1 The first averages

2.2 From averages to market-value indexes

2.3 The academic case for owning the index

2.4 The first index portfolios and the first index fund

2.5 Index futures and options: the index becomes tradable

2.6 The exchange-traded fund

2.7 Going global: MSCI, FTSE and the classification of markets

2.8 Beyond market value: smart beta, ESG and themes

2.9 Index investing in Vietnam

2.10 Lessons from 130 years of indexes

← Chapter 1: What Is an Index?Chapter 3: The Mathematics of an Index →