Definition
Nikkei Stock Average (Nikkei Index)
The Nikkei Stock Average, commonly known as the Nikkei Index, is a crucial stock market index used on the Tokyo Stock Exchange. It is a price-weighted average comprising 225 Japanese companies from various sectors. Established by the Nihon Keizai Shimbun (Nikkei) financial newspaper group, it serves as a benchmark for the performance of the Japanese stock market. The index was restructured in 1991 to minimize the influence of futures-related trading, and membership is reviewed and renewed annually.
Examples
Example 1: Measuring Market Performance
The Nikkei Index is often used to gauge the performance of the Japanese stock market. For investors seeking insights into Japanese stocks, the index provides a snapshot of overall market health. For instance, if the Nikkei Index rises significantly during a trading day, it indicates a bullish market trend, reflecting investor confidence in the listed 225 companies.
Example 2: Investor Benchmarking
International investors often use the Nikkei Index to benchmark their portfolios against the Japanese market. By comparing their portfolio’s performance to the Nikkei Index, investors can determine how well they are doing relative to the market average.
Frequently Asked Questions
Q: What sectors are included in the Nikkei Index?
A: The Nikkei Index covers a wide range of sectors, including technology, automotive, electronics, banking, retail, and telecommunications.
Q: How is the Nikkei Index calculated?
A: The Nikkei Index is a price-weighted index, which means it is calculated based on the share prices of its constituent companies rather than market capitalization.
Q: How often is the Nikkei Index updated?
A: The composition of the Nikkei Index is reviewed annually to ensure it represents the current market conditions.
Q: What makes the Nikkei Index different from other stock indices?
A: Unlike market-cap weighted indices, the Nikkei Index is price-weighted, giving more influence to higher-priced stocks over those with lower prices.
Q: Who administers the Nikkei Index?
A: The Nikkei Index is administered by the Nihon Keizai Shimbun (Nikkei) financial newspaper group.
Related Terms
Tokyo Stock Exchange (TSE)
The Tokyo Stock Exchange is the primary stock exchange in Japan where the stocks included in the Nikkei Index are traded.
Price-Weighted Index
A price-weighted index is an index in which each stock influences the index’s value in proportion to its price per share.
Market Cap Weighted Index
A market cap weighted index is an index where each stock’s impact on the index’s performance is proportional to its market capitalization.
Online Resources
Tokyo Stock Exchange Official Website
Provides official information, live data, and resources related to stocks traded on the Tokyo Stock Exchange.
Nikkei Asian Review
News and analysis related to Asian markets, including updates on the Nikkei Index.
Suggested Books for Further Studies
“Investing in Japan: An Introduction to the Nikkei and Beyond” by Masaaki Kanno
A comprehensive guide for investors looking to understand and invest in the Japanese stock market.
“Japanese Equity Markets: Structure, Regulations and Practice” by Mitsuhiro Fukao
An in-depth examination of the workings of the Japanese equity markets, including insights into the Nikkei Index.
“Market Masters: Interviews with Top Financial minds in Japan” by Ken Morikawa
Interviews with prominent investors and financial experts on strategies for investing in Japanese stocks.
Accounting Basics: “Nikkei Stock Average (Nikkei Index)” Fundamentals Quiz
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