Information about indices published on the TSE website
General Information on Indices
-
Q1.
What is a stock price index?
-
A1.
In simple terms, a stock price index indicates the overall price fluctuation of its constituent stocks. It may be easier to understand if you think of a stock price index as a barometer that shows whether the overall stock market is rising or falling. Monitoring the price movements of individual stocks is of course important when investing in shares, but at the same time, monitoring the general trend in the stock market as a measure for investment decisions is also essential. Stock price indices have, therefore, become indispensable for making investment decisions because they track stock market movement. Besides TOPIX (Tokyo Stock Price Index), which is a market benchmark with functionality as an investable index,covering a wide range of Japanese stock market, JPXI also calculates and publishes a large number of size-based and other TOPIX sub-indices, sector-based indices, and a set of new stock price indices divided into six categories according to market capitalization and liquidity such as the TOPIX Core 30
Indices Line-up
-
Q2.
What is a benchmark?
-
A2.
A stock price index not only plays a general role as an indicator, but also plays an important role as a "benchmark" for asset investment. This means that it serves as the evaluation standard for asset management performance.
For example, assuming Investment A and Investment B showed annual growth of 130% and 150% respectively. Both investments appear to have performed well, but is that really the case? Let's try evaluating asset management performance in comparison with the movement of TOPIX (Tokyo Stock Price Index).
This shows that Investment A's performance fell short of TOPIX's gain while Investment B's performance bettered TOPIX's gain.
Since TOPIX tracks overall stock market movement, a comparison of these investment performances with the movement of TOPIX gives an insight into whether the investments underperformed or outperformed the stock market.
The majority of Japanese institutional investors evaluate their asset management performance by comparing their returns against TOPIX in this way.
-
Q3.
What types of transactions use indices?
-
A3.
Indices play a role as a target/benchmark for asset management when investors want to diversify their investments, such as when pension funds, investment trusts, and other companies invest large amounts of capital in many different types of stock, because indices comprehensively track the movements of multiple listed stocks.
Indices themselves cannot be bought or sold directly since they are nothing more than a result calculated based on stock prices. Even if you tried to gather all the shares to match the calculation method of the stock price index, you would have to buy an enormous variety of shares. As a consequence, the number of individual investors that can do this is extremely limited.
That said, it comes as no surprise that there are investors who want to buy index-linked products. Investment trust companies sell various index funds to meet this demand.
Index funds are equity funds designed to perform in line with a given index such as TOPIX. For example, a TOPIX-linked fund is for investors who do not expect the fund to outperform TOPIX but would like to be sure the fund will perform as well as TOPIX – in other words, as well as the overall stock market.
OSE also operates a TOPIX futures market and a TOPIX options market. Please refer to the respective sections of the TSE website which explain the function and use of futures and options trading.
Such index-based asset management has now become a fundamental approach to asset management
-
Q4.
What are the major world indices?
-
A4.
As shown in the table, many of the world's indices are capitalization-weighted. In the U.S., many institutional investors use the capitalization-weighted S&P 500 and NASDAQ Composite Index rather than the Dow Jones Industrial Average Index, and the global trend has shifted to capitalization-weighted indices.
| Capitalization-weighted | Price-weighted |
|---|
TOPIX (JAPAN)
S&P500 (U.S.)
NASDAQ Composite Index (U.S.)
FT-SE100 (U.K.)
DAX (Germany)
CAC40 (France)
Hang Seng Index (Hong Kong)
Straits Times Index (Singapore)
| Nikkei Stock Average (Nikkei 225)
Dow Jones Industial Average (U.S.) |
-
Q5.
How is the calculation method of the price-weighted Nikkei 225 different from that of the capitalization-weighted TOPIX Index?
-
A5.
A price-weighted index is calculated based on the so-called average stock price, found by adding the prices of each of the stocks in the index (referred to as "component stocks") and dividing the sum by a constant. The Nikkei Stock Average (Nikkei 225) calculated and published by Nikkei Inc. uses this calculation method.
| Calculation formula for price-weighted index |
|---|
| Value of index = Sum of prices of component stocks ÷ Constant |
In contrast, a capitalization-weighted index is calculated by dividing the sum of the current market values of each component stock (derived by multiplying the stock price by the number of listed shares; indicates the asset value of the stocks) by the sum of their market values at a specific point in time.
A capitalization-weighted index indicates how much market capitalization at the time of calculation has increased or decreased compared with a specific point in time in the past, and can be viewed as indicative of stock price fluctuations in terms of assets.
| Calculation formula for capitalization-weighted index |
|---|
| Value of index = Sum of current market values of component stocks ÷ Market value of component stock at a specific point in time |
The TOPIX (Tokyo Stock Price Index) Index commonly used in the management of Japanese equity assets is also a capitalization-weighted index. Calculated and published by JPXI, TOPIX shows how much the market capitalization of all stocks of TOPIX constituents has increased or decreased based on the market capitalization of all stocks listed on the TSE First Section as of January 1, 1968.
Both types of indices have their advantages and disadvantages. However, many generally believe that capitalization-weighted indices are more suitable as an evaluation standard for asset management performance.
Since a capitalization-weighted index tracks fluctuations in the capitalization of the stock market or a section of the stock market, such an index can be considered more useful for pension fund or investment trust managers who need to directly address any increase or decrease in the asset value of a particular fund. This is one of the reasons why TOPIX is commonly used in asset management in Japan.
Even if a price-weighted index and a capitalization-weighted index had the same component stocks, there is not necessarily a connection between fluctuations in the average stock price and changes in the asset value, or market capitalization, of a particular fund. Consequently, people say that if you focus solely on the movement of a price-weighted index, you risk misreading a fund's performance.
-
Q6.
I would like to know more about the TOPIX calculation method.
-
A6.
TOPIX (Tokyo Stock Price Index) is a market benchmark with functionality as an investable index,covering a wide range of Japanese stock market, and it is a free-float adjusted market capitalization-weighted index. TOPIX is calculated and published by JPXI.
Since TOPIX indicates fluctuations in the asset value of virtually all shares listed on the Japanese stock market, it lends itself to usage as a benchmark for the management of pension funds and investment trusts, which spread investment across many different types of stocks.
This is the calculation formula for TOPIX.
TOPIX = (Current market value of TOPIX constituents ÷ Base market value) × 100
TOPIX shows how much the current market value of all stocks of TOPIX constituents has increased or decreased based on the market value of all stocks listed on the TSE First Section as of January 4, 1968. The market value used as the basis for the calculation is referred to as the "base market value" and is revised whenever necessary to maintain continuity if the market value fluctuates due to a new listing, delisting or any reason other than market fluctuation.
Let's try actually calculating TOPIX in a simple example.
Let's assume that there are only two stocks of TOPIX constituents (Stock A and Stock B) and that the stock price, number of listed shares and capitalization of each of the stocks as of a given date, April 1, for example, were as follows.
| | Stock price | Number of listed shares | Capitali
zation |
|---|
| Stock A | 600 yen | 20 million shares | 12.0 billion yen |
| Stock B | 2,000 yen | 10 million shares | 20.0 billion yen |
In this case, the capitalization of TOPIX constituents is 32.0 billion yen, found by adding the capitalization of Stock A (600 yen x 200 million shares= 12.0 billion yen) and the capitalization of Stock B (2,000 yen x 10 million shares = 20.0 billion yen). If the base market value is 2.0 billion yen, when these figures are put into the above formula, TOPIX is calculated at 1,600 points.
TOPIX Index value on April 1 = (32.0 billion yen ÷ 2.0 billion yen) × 100 = 1,600 points
Then, on the next day, April 2, the situation of each of the stocks was as follows.
| | Stock price | No. of listed shares | Capitali
zation |
|---|
| Stock A | 700 yen | 20 million shares | 14.0 billion yen |
| Stock B | 2,000 yen | 10 million shares | 20.0 billion yen |
The price of Stock A rose 100 yen to 700 yen, and the rest of the conditions remained the same. In this case, since the capitalization of all stocks of TOPIX constituents, calculated by the same method, is 34.0 billion yen, the TOPIX Index value on April 2 is calculated as (34.0 billion yen ÷ 2.0 billion yen) × 100 = 1,700 points.
If we look at fluctuations in total market capitalization from April 1 through April 2, total market capitalization increased 6.25%, from 32.0 billion yen to 34.0 billion yen. During this time, TOPIX also rose 6.25 percentage points, from 1,600 points to 1,700 points.
As you can tell from this simple example, TOPIX can be described as an index that more or less accurately indicates "fluctuations in total domestic market capitalization".
-
Q7.
Where can I obtain TOPIX index values?
-
A7.
TOPIX data can be found in many places including on the JPXI website, in various statistical data published by TSE, major newspapers (Asahi, Yomiuri, Mainichi, Nikkei, Sankei, Tokyo, etc.), on NHK news broadcasts and from information vendors.
JPXI calculates and publishes indices besides TOPIX in the form of sector-based indices and size-based indices, which are created by dividing the constituents of TOPIX into categories according to industrial sector and size. These indices have the role of indicating stock market movement in more detail and are used to supplement TOPIX in research analysis and as asset management targets.
Like TOPIX, data on sector-based indices and size-based indices is also available from many sources including the JPX website, various statistical data published by TSE and information vendors.
In the same way as for TOPIX, TSE also calculates sub-indices for the TOPIX Total Return Index. Various statistical data is also provided via electronic media and published on the JPXI website.
-
Q8.
How are newly listed companies included in TOPIX and its sub-indices?
-
A8.
There are 3 ways for inclusion in TOPIX and its sub-indices.
1. New listing on Prime Market (direct listing, listing via other exchange)
⇒Included on the last business day of the month after the month of listing.
2. New listing of a newly formed company resulting from corporate consolidation, etc. that results in a TOPIX constituent being delisted and the new company being included in TOPIX.
⇒Included on the ｎew listing date (if this is a non-business day, the ｎext business day).
3. Transfer to Prime Market from Standard Market or Growth Market
⇒Included on the last business day of the month following the month of the change.
For more information on index calculation, please see the following website.
TOPIX
For more information on obtaining data for index calculation, please see the following website.
Reference Data
Close