Nikkei 225 Index (N225)

QUOTE AND NEWS
The Hindu Business Line  5 hrs ago  Comment 
Nifty 50 June Futures (9,628) Following a positive open at 9,618, the Nifty futures contract immediately slipped into the red, taking bearish cues from the Asian markets. The Nikkei 225 is down by 15...
The Economic Times  9 hrs ago  Comment 
The Nikkei rose 0.3 per cent to 19,953.33 in midmorning trade.
The Hindu Business Line  Jun 13  Comment 
Nifty 50 June Futures (9,646) Taking cues from the mixed Asian markets, the Nifty futures contract started the session on a positive note at 9,637 levels. The Nikkei 225 is marginally down by 9 point...
The Hindu Business Line  Jun 13  Comment 
Utilities, drug makers and other defensive stocks performed relatively well.
The Economic Times  Jun 12  Comment 
The Nikkei ended down 0.5 percent at 19,908.58.
The Hindu Business Line  Jun 12  Comment 
The Economic Times  Jun 9  Comment 
The Nikkei share average ended 0.5 per cent higher at 20,013.26. For the week, the index posted a 0.8 per cent drop.
The Economic Times  Jun 9  Comment 
Japan's Nikkei added 0.5 per cent and MSCI's broadest index of Asia-Pacific shares outside Japan were all but flat.
The Economic Times  Jun 9  Comment 
The closely watched settlement price is calculated from the opening prices of the 225 shares in the Nikkei.
MarketWatch  Jun 9  Comment 
Asian stocks started Friday trading mixed, in a wait-and-see mode as exit polls suggested the U.K.’s governing Conservative party failed to keep its parliamentary majority in Thursday’s general election there.
The Economic Times  Jun 8  Comment 
The Nikkei ended down 0.4 per cent at 19,909.26, after climbing 0.1 per cent in morning trade.




 
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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