The S&P/MIB is a market capitalization weighted index derived from the top 40 equities of the Borsa Italiana. It covers over 80% of the local market cap and its sector breakdown aims to mirror the health of the 10-economic sectors of the Italian Stock exchange at Milan. The Index is maintained by a partnership of Standard and Poor's and Borsa Italiana.
These indices are also called market capitalization weighted indices or the value-weighted indices. 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):
The float-adjusted market capitalization is determined through an Investable Weight Factor (IWF):
IWF = 100% – Sum of the % of shareholdings held by major shareholders.
The Investable Weight Factor is calculated by determining all long-term shareholders owning 5% or more of the shares outstanding of the specific share class, with the exception of Pension Funds and OICR or Organismi di Investimento Collettivo del Risparmio (i.e. mutual funds and Societa' di Investimento a Capitale Variabile, SICAV). In the case of a legally binding control block (patti di sindacato) with a weight of 5% or more, all the individual shareholders of that block, even with individual stakes less than 5%, will also be excluded from the float.
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.
The composition of the MIB Index, as of October 24, 2008:
|COMPANY TICKER (MI:)||COMPANY NAME||Index Factor|
|G||Assicurazioni Generali SpA||0.9059|
|BMPS||Banca Monte dei Paschi di Siena SpA||0.5073|
|PMI||Banca Popolare di Milano Scrl||1.0546|
|BP||Banco Popolare - Societa Cooperativa||1.0546|
|ENI||ENI S.p.A. (E)||0.5479|
|F||FIAT S.p.A. (F-MI)||0.734|
|ES||Gruppo Editoriale L'Espresso SpA||0.3596|
|ISP||Intesa Sanpaolo SpA||0.8004|
|MN||Mondadori (Arnoldo) Editore SpA||0.4461|
|PC||Pirelli & C. SPA||0.502|
|STM||ST Microelectronics NV (Italy)||0.7646|
|PG||Seat Pagine Gialle SPA||0.522|
|SRG||Snam Rete Gas||0.4472|
|TI||Telecom Italia SPA||0.753|
|UBI||UBI Banca ScpA||1.0546|
|UNI||Unipol Gruppo Finanziario SpA - Ordinary Shares||0.5199|