Index futures are typically based on what type of data?

Index futures are primarily based on price indexes, which represent a collection of stocks and their market performance within a specific sector or the entire market. These futures contracts allow investors to speculate on the future value of the underlying price index, providing a way to gain exposure to market movements without having to buy or sell individual stocks directly.

The pricing of index futures is built upon the expected future value of the index, which encompasses the aggregate movements of the stocks contained in the index. By using price indexes, traders can hedge their portfolios or capitalize on market trends efficiently, considering the overall market conditions rather than focusing on individual components.

In contrast, bond prices, dividend yields, and individual stock performance do not serve as the underlying basis for index futures. While these elements can influence the market sentiment and, consequently, the price indexes, they are not the fundamental data upon which index futures are constructed.