Euronext 100 (N100-FR)

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Euronext 100 is the blue chip index of the Euronext N.V. and it spans about 80% of the major companies on the exchange. It's different from most other indices, because it spans out to companies from different countries within Europe.

Euronext 100 comprises of the largest and most liquid stocks traded on the exchange. Each stock must trade more than 20 percent of its issued shares for them to be chosen, this is monitored over a period of one year. The index is reviewed quarterly through a size and liquidity analysis of the investment universe. The 150 companies that are ranked immediately below them make up the constituents of the Next 150 index. The base level of both indices was set at 1,000 as at 31 December 1999.^[1]

Weighting and Calculations

They involve the total market capitalization of the companies weighted by their effect on the index, so the larger stocks would make more of a difference to the index as compared to a smaller market cap company. This is also called the free float method. The basic formula for any index is (be it capitalization weighted or any other stock index)^[2]:

• Index level= Σ(Price of stock* Number of shares)*Free float factor/ Index Divisor.

The Free float Adjustment factor represents the proportion of shares that is freefloated as a percentage of issued shares and then its rounded up to the nearest mulitple 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 – for example, the S&P 500 market value is roughly $11.8 trillion. Rather than deal with ten or more digits, the figure is scaled to a more easily handled number, currently around 1250. Dividing the portfolio market value by a factor, usually called the Index divisor, does the scaling.

Continuity in index values is maintained by adjusting the divisor for all changes in the constituents’ share capital after the base date. This includes additions and deletions to the index, rights issues, share buybacks and issuances, and spin-offs. The divisor’s time series is, in effect, a chronological summary of all changes affecting the base capital of the index. The divisor is adjusted such that the index value at an instant just prior to a change in base capital equals the index value at an instant immediately following that change^[3].

Composition

The composition of Euronext 100 as of 16th October, 2008^[4]:

References

1. ↑ Euronext Indices
2. ↑ Capitlization method methodology
3. ↑ Capitalization Weighted Description
4. ↑ Euronext->Composition