The Tokyo Stock Price Index is the composite index for the Tokyo Stock Exchange tracking all domestic stocks from the First Section of the exchange. The index is a measure of the market value changes of the common stocks on the TSE. The TOPIX can be mapped back to its base date on January 4th, 1968 and its base value of 100 points.
TOPIX shows the measure of current market capitalization assuming that market capitalization as of January 4 ,1968 is 100 points. The index is formulated as such:
Where the aggregate market capitalization is calculated as:
The Free float Adjustment factor represents the proportion of shares that is free floated as a percentage of issued shares and then its rounded up to the nearest multiple of 5% for calculation purposes. To find the free-float capitalization of a company, first find its market cap (number of outstanding shares x share price) then multiply its free-float factor. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders.
While one might track this portfolio’s value in dollar terms, it would probably be an unwieldy number. Rather than deal with ten or more digits, the figure is scaled to a more easily handled number. Dividing the portfolio market value by a factor, usually called the Index divisor, does the scaling.
Since the TOPIX covers all the domestic stocks on the First section of the Tokyo Stock Exchange, the criteria for the TOPIX is the same as the one established for selection of stocks in the First Section. They are:
The TOPIX covers all the companies on the first section of the Tokyo Stock Exchange. As of 10th November 2008, there were 1713 companies listed on the first section of the TSE. The market value for the index on the same date, was 294,733 Billion Yen, with a trading volume of 212 million shares.