share market indexes
A share market index basically summarises the value and performance of
a group of companies in the share market. The two most common ones on
the Australian market are the Top 200
index (S&P/ASX 200, or XJO), and the All Ordinaries
(actually the top 500 stocks, or XAO). More information about these at
General information about our
share market indexes at www.asx.com.au.
The market indexes mentioned above, and described at right, are known
indexes. There are other types of indexes, including sector indexes. In
Australia we use the GICS system to classify companies according to
their principal activities and to allocate them to a market sector
(more about GICS below).
Australia's Top 200 stocks (the constituents of the S&P/ASX 200
XJO index) are allocated to one of eleven* GICS
sectors, so that investors can
more easily see the performance of a company relative to it's own sector index
(ie. relative to it's peers, and to similar companies in other markets).
The eleven* GICS sectors
are (see GICS details below):
In addition to the above official GICS sectors, some organisations also refer to the following GICS sub-sectors:
- Consumer Discretionary
- Consumer Staples
- Health Care
- Information Technology
- Telecommunication Services
* - Note that for a number of years there were only 10 GICS
sectors, but this was revised effective 31 August 2016 to break out the
REIT sub-sector from within the Financials sector, to be a sector of
its own. See an official announcement from S&P Dow Jones.
- Australian REITs
- Financials excluding A-REITs
- Metals and Mining
information from Standard & Poors about the
market indexes at au.SPIndices.com.
share market indexesSee more information about the indexes (and index rebalancing news) at the Australian Market Index website, and also at S&P Dow Jones Indices.
and index rebalancing
From time to time, the list of stocks in each share market index is
revised. Remember that there are rules that determine which stocks are
eligible for listing in each index, and as time goes by, the
eligibility of any one stock can change.
The most common way that this
change comes about is due to the daily share market actions and the
capitalisation of each stock. If a stock in the Top 200 index suffers a
price fall, then it might end up falling off the bottom of the list of
Company mergers can also trigger removal from an index.
Standard & Poors manages the rules for indexes, and reviews the
index constituent list each quarter or half-year (depending on which
index). See the recent announcements on index rebalancing here.
Index rebalance announcements are made by S&P on the first
of March, June, September and December. The XJO is rebalanced each
quarter, and the S&P/ASX 300 twice yearly in March and
- Information about the Global
Industry Classification Standard coding system in
the various indexes and security groupings used in the market. It can
be very beneficial to understand how GICS codes are allocated to
because it often happens that like-coded stocks move together in the
that changes were made (effective after 31 August 2016) to more
clearly differentiate Real Estate Investment Trusts (REITs) by
allocating them to their own sector - see details at S&P.
The term market average
has been used for many years to refer to a stock market index. Charles
Dow referred to the major market indexes as the market averages in
his day (late 1800s).
Also see Robert's information on Dow
These days it is acceptable to refer to a market index as a market average.
Which stocks are in each index?
downloads for Toolbox Members ***
Robert's monthly updated lists of
stocks are in each index?"
are available here for download.
These lists are in CSV format to download and view
for use in
About the Australian indexes
capitalisation - This is a measure of the "size" of a
company. It is simply calculated by multiplying the current share price
by the number of shares on issue. On the Australian market, the largest
company by market capitalisation is currently BHP. We could easily
produce a list of all stocks on the market sorted by "market cap".
Understanding this idea will help to understand the discussion below
about the market indexes.
note about "top stocks"
- When we say that an index comprises the "top stocks" in our market,
it does not mean each and every stock within the list of top stocks.
For example, the XJO
index (S&P/ASX 200) comprises a selection of the "top 200
our market by capitalisation, as at the latest rebalancing (quarterly
for the XJO). Any stock which does not qualify for listing
in this index (eg. due to not enough liquidity) is excluded from the
index. So, the "Top 200" index might be a selection of 200 stocks from
top 300 or so on our market.
- We often hear a reference to the Australian share market without any
other qualification. On some radio stations and some TV stations, this
will be a reference to the S&P/ASX 200 index, while on others
a reference to the All Ordinaries index. Seesome details about this in
the following paragraphs.
See charts of the Australian indexes at ASX.com.au.
Indexes - Composition (download)
Some common questions:
- How are all the ASX
sub-indexes, made up?
Which stocks are in which index?
How does the S&P/ASX 200 index (XJO) compare to the All
Ordinaries index (XAO)?
and to the S&P/ASX 300 (XKO)?
What about the S&P/ASX Mid-cap 50 (XMD)?
The 2-page PDF file "ASX
Indexes - Composition" gives a good diagrammatic overview,
lists some of the stocks in each index.
XJO - S&P/ASX 200 index
- This is basically the top 200 stocks in the Australian share market.
That is, the top 200 by market capitalisation. It is the investable
for the Australian equity market. The S&P/ASX 200 is comprised
the S&P/ASX 100 plus an additional 100 stocks. Source - www.asx.com.au.
See more information at www.marketindex.com.au/methodology.
XAO - All Ordinaries index
- This is basically the top 500 stocks in the Australian share market.
The index is made up of the weighted share prices of about 500 of the
largest Australian companies. Established by ASX at 500 points in
January 1980, it is the predominant measure of the overall performance
of the Australian share market. The companies are weighted according to
their size in terms of market capitalization (total market value of a
company's shares). Source - www.asx.com.au.
See more information at: www.marketindex.com.au/methodology.
The VIX Volatility index has existed in
the US for quite some time. It is basically a measure of the amount of
fear in the share market. Introduced in 1993, the Chicago
Board Options Exchange (CBOE) Market Volatility Index (VIX)
is regarded as a "key
measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices"
(source and more details: www.cboe.com). Other volatility
indexes index, including the relatively new Australian market VIX.
The ICB system (Industry
Classification Benchmark) is a classification system somewhat
to the GICS system, and uses a system of 10 industries, partitioned
into 20 supersectors, which are further divided into 41 sectors, which
then contain 114 subsectors (see Wikipedia for details). This
system is not in widespread use in Australia. The 10 industry
- Oil & Gas
- Basic Materials
- Consumer Goods
- Health Care
- Consumer Services
and stock exchanges
The orderly trading of shares, currencies, futures
or commodities happens in a market,
but more specifically in an exchange.
The two columns at left focus on aspects of the
Australian share market, and some of the indexes in the Australian
the globe there are many other markets / exchanges - some are share
some commodity markets - and across those markets there are many, many
different indexes that summarise the performance of a selected group of
stocks, or commodities.
Some major market indexes
time to time you might here something on the radio or TV regarding
stock market performance. The following might help you undertand a
little more about what they are talking about.
- Some of the stock market reports (in Australia) loosely refer to
"Wall Steet". This is usually a reference to the Dow Jones Industrial
Average index (see more below).
- This is usually a reference to the Australian Share Price Index
futures contracts (the ASX SPI 200 Index Futures),
and the value is often quoted in the mornings before the Australian
market opens. Many people suggest that it is an indication of the
likely opening level of the Australian market. However, in this regard
it is not very useful or helpful for the average retail investor.
Here is a list of some of the more closely watched
Jones Industrial Average
(DJIA) - This index is often just referred to as "the Dow" and is
comprised of only 30 major stocks from the US market (from the - NYSE -
New York Stock Exchange and the Nasdaq). See more details.
Jones Transportation Average (DJTA) - This index
represents twenty key transporation companies in the US. See more details.
500 index - This is a broader market index covering 500
major US stocks from the NYSE and Nasdaq. See
Russell 2000 index - This is a small-cap stock market
index, managed by the Russell Investments company. See more details.
index - This is an index representing a selection of technology stocks,
and is managed by Nasdaq OMX.
- German DAX
- French CAC-40
- London FTSE
- New Zealand NZ50
- Hong Kong
major stock exchanges
Here is a list of just some of the major stock
exchanges around the world, with links to more details about each
For a longer list of stock exchanges around the
world, see Wikipedia.org.
Some major commodity exchanges
Here is a list of some of the major comodities
exchanges around the world, with links to more details about each
mentioned in the left hand column, market indexes need to be rebalanced
from time to time. When the constituent stocks in a share index fall
out of favour, and the share price falls, the market cap falls and can
end up with a low market cap that no longer qualifies to be in the
There are rules for rebalancing market indexes,
and the rules vary from market to market, and from index to index.
For example, the US Russell 2000 index is
rebalanced annually as at 30 June (see more details).