Nikkei 225 Index (N225)

QUOTE AND NEWS
Japan Today  Apr 10  Comment 
Tokyo investors will be cautious next week with a sense of achievement after the benchmark Nikkei index topped the 20,000 level and as the full-fledged corporate earnings season approaches. On Friday, Tokyo stocks closed down 0.15%, after the...
CNNMoney.com  Apr 10  Comment 
A close look at the Nikkei reveals that one company in particular has played a starring role in its dramatic rise.
The Hindu Business Line  Apr 10  Comment 
Japan's Nikkei share average topped the psychological 20,000-point mark on Friday for the first time in 15 years on hopes of stronger corporate earnings, and gained 2.4 per cent on the week. ...
MarketWatch  Apr 10  Comment 
Asian markets took off this week with Hong Kong gaining the most in more than three years and Tokyo’s Nikkei breaking 20,000 for the first time in 15 years
Wall Street Journal  Apr 10  Comment 
Asia’s stock markets took off this week with Hong Kong gaining the most in more than three years and Tokyo’s Nikkei Stock Average breaking 20000 for the first time in 15 years.
Financial Times  Apr 10  Comment 
BBC News  Apr 10  Comment 
Investors focus on Japan as the country's benchmark Nikkei 225 index trades above 20,000 for the first time since April 2000.
Yahoo  Apr 10  Comment 
The stock market push was complemented by another low for euro zone bond yields, after Greece repaid a loan tranche to the International Monetary Fund to keep alive its hopes of more aid. Subdued Chinese inflation also led to talk of additional...
Yahoo  Apr 10  Comment 
Japan's Nikkei share average rose above 20,000 for the first time in 15 years, supported by hopes for larger shareholder returns, recovery in domestic consumption and a positive tone in global equity markets. ...
Mondo Visione  Apr 9  Comment 
From the viewpoint of further enhancing the convenience of market participants, Osaka Exchange, Inc. (OSE) will introduce new options contracts on the Nikkei Stock Average (Nikkei 225) in addition to the current contracts, which expire on the...




 
TOP CONTRIBUTORS

The Nikkei 225 Stock Index maps companies on the Tokyo Stock Exchange (TSE). It is the oldest and the most well known Asian index in the world. The Nihon Keizai Shimbun (Nikkei) newspaper has been commisioned to officially calculate this index since 1971. The Nikkei 225 began to be calculated on September 7, 1950, retroactively calculated back to May 16, 1949. Currently. the Nikkei is used as the major indicator for the Japanese economy, similar to the Dow Jones Industrial Average (.DJIA). In fact, it was known as the "Nikkei Dow Jones Stock Average" from 1975 to 1985.[1]. However, unlike the Dow Jones, as the Nikkei 225 is designed to reflect the overall market, there is no specific weighting of industries. Stock splits, removals and additions of constituents impact upon the effective weighting of individual stocks and the divisor.[2]

Weighting and Components

The Nikkei is a price weighted average index (the unit is Yen), similar to the Dow Jones Index, based on a par value of ¥50 per share. That means, a ¥50 price change in any stock affects the average the same way, regardless of whether the stock is priced at ¥5 or ¥500 per share. The Nikkei 225 index's components are reviewed every year in September. Any changes, if required, are published in October and the index is adapted accordingly.

To calculate an equal weighted index, the market capitalization for each stock used in the calculation of the index is redefined so that each index constituent has an equal weight in the index at each re-balancing date. In addition to being the product of the stock price, the stock’s shares outstanding, and the stock’s float factor – and the exchange rate when applicable; a new adjustment factor is also introduced in the market capitalization calculation to establish equal weighting.

  • Stock Market Value= Price of shares * Number of shares outstanding * Free float factor * Exchange Rate(if applicable) * Adjustment Factor[3]

The Adjustment factor of a stock is assigned to the stock at each re-balancing date, which makes the stock value for each stock equal. For index component, the value would be:

  • Adjustment Factor= Index specific constant "Z"/(Number of shares of the stock*Adjusted stock market value before re-balancing)

The main criticism with this index is that a $5 priced share would have the same weight as the $200 priced share, which gives the smaller shares more weight than their due. Moreover, the stocks keep changing and so does the equality, so the stock has to be rebalanced from time to time[4] as compared to a cap weighted index.

References

  1. Investopedia.com
  2. Wikipedia
  3. Calculating Equal weighted index
  4. Definition of a Equal Weighted Index
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