Definition of Broad Based Index

Broad Based Index is an index that represents a large cross section of the market as a whole. The price movement of the index reflects the price movement of a large portion of the market, such as the S&P 500 or the Wilshire 5000.

Applying "Broad Based Index" to Securities Exams:

When an investor is evaluating the price action of the market the investor will often look at various indexes. Broad based indexes are more representative of the price action in the market place and are often better indicators of the overall direction of the market. The S & P 500 is a much broader index than the Dow Jones Industrial average and is more representative of the price action in the market.

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