FTSE Indexes

FTSE Indexes Financial Times Stock Exchange Group FTSE 100 Stock Market Indicators Investment Portfolio Management Financial Metrics
A comprehensive overview of FTSE Indexes, including their types, historical significance, and relevance to investors and portfolio managers.
On this page

Definition

The FTSE Indexes are a series of share indexes compiled by the FTSE Group, which is an independent company jointly owned by the Financial Times and the London Stock Exchange. These indexes are weighted arithmetic averages for ten broad sectors in the stock market, which are further subdivided into 38 industry subsectors. They are widely used by investors and portfolio managers for tracking the performance of different market sectors and stocks.

Types of FTSE Indexes

  1. FTSE All-Share Index:

    • Constitutes over 600 shares and fixed-interest stocks, capturing over 98% of the market.
    • Includes selections from the financial sector and is calculated after the close of daily trading.

  2. Financial Times Ordinary Share Index (FT 30):

    • An unweighted geometric average of 30 leading industrial and commercial shares chosen to represent British industry.
    • Historical main market barometer that excludes banks, insurance companies, and government stocks.

  3. FTSE 100 Index (Footsie):

    • Represents the price of the 100 largest UK companies on the London Stock Exchange.
    • Calculated minute-by-minute and reviewed quarterly.

  4. FTSE 250 and FTSE 350:

    • FTSE 250: Includes companies with market capitalizations between £150 million and £1 billion.
    • FTSE 350: Aggregates the FTSE 100 and the FTSE 250, offering comprehensive market coverage.

  5. FTSE Smaller Companies Indexes:

    • FTSE Small Cap Index: Covers companies with market capitalizations between £20 million and £150 million.
    • FTSE Fledgling Index: Covers smaller companies that do not qualify for the SmallCap Index but meet UK Index series criteria.
    • FTSE AIM Index Series: Targets smaller companies on the Alternative Investment Market.

  6. Financial Times Government Securities Index: Measures the movements of government stocks (gilts).

  7. European and Global Indexes:

    • Euro-Top 100 Index: Focuses on the 100 most highly capitalized EU companies.
    • FTSE Euro 100 Index: Includes eurozone companies.
    • FTSE New EU Index: Covers markets of the ten countries that joined the EU in May 2004.
    • Eurofirst Index series: Launched in conjunction with Euronext NV, includes the FTSE Eurofirst 300 Index of blue-chip European companies.
    • FTSE All World Index Series: Launched in 1987, covering over 2800 share prices from 49 countries.

Examples

Example 1: FTSE 100 Index

An investor interested in large-cap stocks in the UK would closely monitor the FTSE 100 Index, which consists of the top 100 largest companies listed on the London Stock Exchange. This index provides real-time updates and is recalculated constantly during trading hours.

Example 2: FTSE Small Cap Index

Small-cap investors may look at the FTSE Small Cap Index, which includes companies with market capitalizations between £20 million and £150 million. This offers insights into the performance of smaller growth-oriented companies.

Frequently Asked Questions

What is the FTSE 100 Index?

The FTSE 100 Index, often referred to as Footsie, represents the 100 largest UK companies by market capitalization listed on the London Stock Exchange. It is a key indicator of the overall health of the UK equity market.

How often are FTSE 100 constituents reviewed?

The constituents of the FTSE 100 Index are reviewed quarterly to ensure they reflect the most significant companies in the UK market.

How is the FTSE 250 different from the FTSE 100?

The FTSE 250 includes mid-cap companies, capitalized between £150 million and £1 billion, while the FTSE 100 includes the largest 100 companies. Together, they comprise the FTSE 350 Index.

What sectors are covered by the FTSE All-Share Index?

The FTSE All-Share Index covers over 600 shares across various sectors such as general industrial, cyclical consumer goods, and financial sectors, providing an extensive measure of 98% of the market.

What kind of investors might use the FTSE Fledgling Index?

Investors looking for detailed performance metrics of the smallest market-cap companies may use the FTSE Fledgling Index. It includes companies too small for the SmallCap Index yet significant within the UK Index series.

  • Market Capitalization: The total market value of a company’s outstanding shares, used to determine its size within indexes.
  • Geometric Average: A type of average often used in finance to signify the consistent growth rate over time.
  • Gilts: Government bonds issued by the UK government, sometimes included in overall market measures like the Financial Times Government Securities Index.

Online Resources

Suggested Books for Further Studies

  • “The 5 Keys to Value Investing” by J. Dennis Jean-Jacques
  • “The Intelligent Investor” by Benjamin Graham
  • “Security Analysis” by Benjamin Graham and David Dodd
  • “Common Stocks and Uncommon Profits and Other Writings” by Philip Fisher
  • “One Up On Wall Street” by Peter Lynch

Accounting Basics: FTSE Indexes Fundamentals Quiz

### What does the FTSE 100 Index represent? - [ ] The 100 smallest companies on the London Stock Exchange. - [x] The 100 largest companies on the London Stock Exchange. - [ ] 100 randomly selected companies on the London Stock Exchange. - [ ] The top 100 performing companies globally. > **Explanation:** The FTSE 100 Index represents the 100 largest companies by market capitalization listed on the London Stock Exchange. ### How frequently are the constituents of the FTSE 100 Index reviewed? - [x] Quarterly - [ ] Monthly - [ ] Annually - [ ] Every two years > **Explanation:** The constituents of the FTSE 100 Index are reviewed every quarter to ensure accurate representation of the largest companies. ### What type of average is used in the FT 30 index? - [ ] Arithmetic average - [ ] Weighted average - [x] Geometric average - [ ] Moving average > **Explanation:** The FT 30 Index uses an unweighted geometric average to represent the movements of 30 leading industrial and commercial shares. ### Which index covers over 600 shares and captures 98% of the market? - [ ] FTSE 100 - [ ] FTSE 250 - [x] FTSE All-Share Index - [ ] FTSE Small Cap Index > **Explanation:** The FTSE All-Share Index encompasses 600+ shares, representing over 98% of the market, and provides the most comprehensive measure. ### What does the FTSE Small Cap Index include? - [ ] Companies with capitalizations below £10 million - [x] Companies capitalized between £20 million and £150 million - [ ] The 250 largest companies - [ ] All companies on the London Stock Exchange > **Explanation:** The FTSE Small Cap Index includes companies capitalized between £20 million and £150 million, targeting smaller-sized companies. ### Why was the FTSE 250 Index created? - [ ] To monitor solely the financial sector. - [ ] To replace the FT 30 Index. - [x] To cover mid-cap companies capitalized between £150 million and £1 billion. - [ ] To measure the overall performance of EU companies. > **Explanation:** The FTSE 250 Index was created to cover mid-cap companies with market capitalizations ranging from £150 million to £1 billion. ### What do you need to understand about the FTSE Fledgling Index? - [x] It includes companies too small for the SmallCap Index. - [ ] It measures only government securities. - [ ] It covers the 100 largest UK companies. - [ ] It does not include investment companies. > **Explanation:** The FTSE Fledgling Index includes companies too small for the SmallCap Index but that still meet other criteria for inclusion within the UK Index series. ### What is the historical significance of the FT 30 Index? - [ ] It includes banks and insurance companies. - [x] It was the main day-to-day market barometer before being superseded by the FTSE 100. - [ ] It represents European Union stocks. - [ ] It uses a weighted arithmetic average. > **Explanation:** The FT 30 Index was once the primary day-to-day market barometer but has been replaced by the FTSE 100 Index for more current market representation. ### How often is the FTSE All-World Index Series calculated? - [ ] Weekly - [ ] Monthly - [x] Daily - [ ] Annually > **Explanation:** The FTSE All-World Index Series is calculated daily, covering over 2800 share prices from 49 countries and reflecting global market movements. ### What sectors are included in the FTSE 350 Supersectors? - [ ] Only technology companies - [ ] Only financial services - [x] A broad range of industry sectors - [ ] Only companies from the FTSE 100 > **Explanation:** The FTSE 350 Supersectors include a series of 18 indexes based on industry baskets, providing an overview of industry performance across the market.

Thank you for exploring our detailed guide on FTSE Indexes. Empower your financial know-how with our in-depth insights and challenging quizzes!

Tuesday, August 6, 2024
Fulfillment
FTSE Indexes
Asset Management January 1, 1
Balanced Mutual Fund January 1, 1
Capital Asset Pricing Model (CAPM) January 1, 1
Common Stock Fund January 1, 1
Dividend Cover January 1, 1
Expected Return January 1, 1
FTSE Indexes January 1, 1
Index Fund January 1, 1

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.