what is the kbw bank index 
the kbw bank index is a benchmark stock index of the banking sector the index was first developed by the investment bank keefe bruyette and woods kbw which specializes in the financial sector it includes a weighting of 24 banking stocks selected as indicators of this industry group the stocks represent large u s national money center banks regional banks and thrift institutions understanding the kbw bank indexthe kbw index utilizes a float adjusted modified market capitalization weighting method the index components are chosen by a committee of five persons 4 kbw employees and one full time employee of the nasdaq exchange that meet quarterly their selection criteria seek to replicate certain market industry and geographic segments by selecting from among the largest banking firms that meet the initial eligibility criteria 3the index focuses specifically on banking and de emphasizes components that would be heavily insurance related or investment oriented for example goldman sachs metlife and berkshire hathaway are notably absent from its components though these stocks are listed in the holdings of other similar indexes index componentsas of may 2021 the individual index components included 4history of the kbw bank indexthe index began its life at the philadelphia stock exchange which was later purchased by nasdaq since the index originated as part of the philadelphia stock exchange some vendors still refer to it as the phlx kbw bank index 5 the index was set to an initial index value of 250 on october 21 1991 1 options began trading on september 21 1992 calculation and dissemination of the index s value happen once per second throughout the regular trading day under the symbol bkx for many years the kbw bank index was the standard benchmark index for the banking sector in the stock market it was also the only way to trade the broad banking sector thanks to the options market before the advent and proliferation of exchange traded funds etfs with so many other choices available to represent the sector the index is now no longer the only representative for banks there are now etf versions of the index available including the invesco kbw bank etf with the trading symbol kbwb these etfs attempt to track the underlying index by owning the same mix of component stocks however no etf can achieve perfect correlation because of the fund s need to accommodate any redemption of shares according to nasdaq the index committee attempts to keep turnover at a minimum the committee evaluates the composition of the index on a quarterly basis in march june september and december interim evaluations may take place after extraordinary circumstances these circumstances include stock splits and certain spin offs and rights issuances and significant legal issues or a company s bankruptcy 6large banks vs regional banksinvestors should understand that while the kbw bank index is a good representation of the banking sector it only focuses on large capitalization stocks it does not include regional banks which are typically somewhat smaller therefore investors should analyze both the kbw bank index and a representative of the next tier in the banking sector there is an etf that tracks the regional index the invesco kbw regional bank index under the ticker kbwr 