A matter of size
How an index is constructed depends on the type of security and its characteristics.
In equity markets, a common way is to use the value of a company’s shares, i.e., its market capitalization (calculated by multiplying the number of shares by the share price). It allows investors to assess its size based on its value: the higher the value, the bigger the company. As a result, companies with a larger market capitalization will have a greater weight when constructing a market-cap weighted index.
Similarly, in fixed income, a bond index can be constructed by considering the size (value) of the corporate bond. The larger the debt, the more weight an issuer will have in the index.
There are also some differences between equity and fixed income indexes:
Companies may continually issue new debt, and therefore more bonds may be associated with a company than share types.
Equities give shareholders ownership of a company for as long as that company exists, while bonds usually have a fixed lifespan.
Share prices are quoted in exchanges and therefore visible and accessible by the investor.
Bonds may often be over-the-counter (OTC) securities. Prices are agreed through the interaction of a buyer and a seller, so the settled price may not be easily visible to the outside world.