Definition: Superlative index

Category: Consumer Price Index

A type of index formula that can be expected to approximate to the cost of living index. An index is said to be exact when it equals the true cost of living index for consumers whose preferences can be represented by a particular functional form. A superlative index is then defined as an index that is exact for a flexible functional form that can provide a second-order approximation to other twice-differentiable functions around the same point. The Fisher, the Törnqvist and the Walsh price indices are examples of superlative indices. Superlative indices are generally symmetric indices. http://www.ilo.org/public/english/bureau/stat/guides/cpi/index.htm