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Composite Index Formula:
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The Composite Index Formula calculates a weighted average of sub-indices to create a single composite measure. It is widely used in economics, social sciences, and performance measurement to combine multiple indicators into one comprehensive score.
The calculator uses the composite index formula:
Where:
Explanation: The formula calculates the weighted average where each sub-index is multiplied by its corresponding weight, then divided by the sum of all weights to normalize the result.
Details: Composite indices are essential for summarizing complex multidimensional phenomena, enabling comparisons across different entities, and supporting decision-making processes in various fields including economics, education, and healthcare.
Tips: Enter weights as comma-separated values (e.g., 0.3,0.4,0.3) and sub-indices as comma-separated values (e.g., 85,92,78). Ensure the number of weights matches the number of indices. Weights should sum to 1 for percentage interpretation.
Q1: What is the range of composite index values?
A: The composite index range depends on the sub-index values. It typically falls within the range of the sub-indices used in the calculation.
Q2: How should weights be determined?
A: Weights should reflect the relative importance of each sub-index. They can be determined through expert judgment, statistical analysis, or equal weighting if no preference exists.
Q3: Can weights be negative?
A: Typically, weights are non-negative. Negative weights would imply inverse relationships that are better handled through different normalization methods.
Q4: What if the sum of weights is not 1?
A: The formula automatically normalizes by dividing by the sum of weights, so the result will be correctly scaled regardless of the total weight sum.
Q5: What are common applications of composite indices?
A: Human Development Index (HDI), Consumer Price Index (CPI), Environmental Performance Index, and various business performance metrics.