Put two series on the same starting line
Indexing to 100 compares proportional movement, not original price.
The short answer
The common start removes the difference in initial level. It does not tell you that the series are interchangeable. Their units, dates, definitions and omitted factors still need checking. A chart labelled “Index, base=100” should identify its base period.
A worked example
For a series [40, 44, 42, 48], divide every value by 40 and multiply by 100. You get [100, 110, 105, 120]. Another series [80, 84, 88, 92] becomes [100, 105, 110, 115].
Your turn
Change the base to the second observation and recalculate. Notice that the final index changes because you asked a new question about a different period.
What this does not tell you
An illustrative calculation does not explain causes or predict future results. Check the dates, units and missing observations before using the method elsewhere.
Related term
IndexSources & review
Original Charts Haven example. All stated numbers are illustrative and allow you to repeat the calculation.
Next lesson: Put change in percentages