Nikkei 225, commonly known as Nikkei, is a stock market index representing the 225 largest companies listed on the Tokyo Stock Exchange (TSE) Performance).
As one of the world’s most closely watched stock indexes, the Nikkei 225 is a barometer of Japan’s economic health and the country’s stock market performance.
What is Nikkei 225?
The Nikkei 225 is the stock market index of the Tokyo Stock Exchange (TSE).
The Nikkei Index measures the performance of 225 of Japan's largest listed companies across various industries.
The Nikkei 225 Index was established on September 7, 1950 and is maintained and published by the Nikkei Business News, Japan's leading financial newspaper.
It is a price-weighted index, which means that the weight of each stock in the index is determined by its share price rather than market capitalization.
How is the Nikkei 225 Index calculated?
It is a price-weighted index calculated in Japanese Yen (JP¥) and its components are reviewed annually.
As a price-weighted index, the Nikkei 225 is calculated by adding the share prices of all 225 component companies and dividing the sum by a divisor.
The divisor is adjusted periodically to account for events such as stock splits, stock issuances, and changes in index composition.
This approach differs from market cap-weighted indexes, where each stock's weight is determined by its market capitalization relative to the total market capitalization of all constituent stocks.
Why is Nikkei 225 important?
The Nikkei 225 is an important benchmark for investors and financial professionals tracking the Japanese stock market.
Because the index includes some of Japan's largest and most influential companies, it provides a comprehensive view of the country's economic health and stock market performance.
The Nikkei 225 Index is also used as the basis for a variety of investment products, including index funds, exchange-traded funds (ETFs), and derivatives, allowing investors to gain access to the Japanese market with a single investment.
What are the ingredients of Nikkei 225?
The Nikkei 225 Index covers a wide range of sectors and industries and is broadly representative of the Japanese stock market.
Companies included in the index are typically leaders in their respective industries, such as automotive, technology, consumer goods, and financial services.
Some of the best-known companies in the Nikkei 225 include Toyota Motor Corp., Sony Group Corp. and SoftBank Group Corp.
The index is reviewed annually in October and its components can be updated to ensure that it still reflects Japan's largest and most influential companies.
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