A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus the persentage change is more important than the actual numeric value. Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index. The Standard & Poor's 500 is one of the world's best known indexes and is the most commonly used benchmark for the stockmarket.
Source: http://www.investopedia.com/terms/i/index.asp
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