Index Methodology

Definition ∞ Index Methodology refers to the specific set of rules and procedures used to construct and maintain a financial index. This includes criteria for selecting constituent assets, their weighting within the index, rebalancing schedules, and calculation formulas. A clear methodology ensures transparency, replicability, and consistency in how the index measures market performance. It forms the basis for passive investment strategies.
Context ∞ In the digital asset space, Index Methodology is a critical topic for crypto market indices and exchange-traded products. News reports often scrutinize the chosen methodology to assess an index’s accuracy and representativeness of the underlying market. Discussions frequently involve debates over centralized versus decentralized data sources and how to address market manipulation concerns within index construction.