Posted in Finance, Accounting and Economics Terms, Total Reads: 628
The FTSE100 is the index for shares of top 100 companies (in terms of market capitalization) on the London Stock Exchange.
The index was launched on 3rd January 1984 with a base level of 1000. The total market capitalization of the FTSE100 companies is around 81% of the London Stock Exchange.
The FTSE Group, a joint venture between Financial Times and London Stock Exchange, maintains the index. The calculation of the index is done real time and posted in every 15 seconds. It is one of the most widely recognized indices globally and is similar to the NIFTY of India.
The FTSE100 index is calculated using the formula –
The free float adjustment factor represents the percentage of all outstanding shares of a company available for open market trading. Thus free float adjustment factor does not include the restricted stocks of the company such as the stocks owned by directors, stocks acquired through FDI, Govt. holding as a promoter/acquirer etc.
Let’s see an example to calculate the index using the above formula.
Assume there are only two companies on the index with following specifications.
No of shares
Free Float Adjustment Factor
(in $ million)
Let the base index level is set to 100.
This index divisor is then used to track further changes in the index level. Let the share price of company A increases to $160 and that of B to $220.