FTSE 100 Index

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The FTSE 100 Index (Financial Times Stock Exchange 100 Index) is a stock market index that represents the 100 largest companies listed on the London Stock Exchange (LSE) by market capitalization. It is widely regarded as a barometer of the health of the UK economy and is one of the most commonly followed equity indices in the world.

History

The FTSE 100 Index was launched on 3 January 1984. It was created by the Financial Times and the London Stock Exchange through a joint venture known as the FTSE Group. The index was designed to provide a comprehensive and accurate reflection of the performance of the largest companies listed on the LSE.

Calculation

The FTSE 100 Index is calculated in real-time and updated every 15 seconds during market hours. The index is weighted by market capitalization, meaning that larger companies have a greater impact on the index's performance. The formula for calculating the index is:

\[ \text{Index Level} = \frac{\sum (\text{Price of Stock} \times \text{Number of Shares})}{\text{Divisor}} \]

The divisor is adjusted for corporate actions such as stock splits, dividends, and rights issues to ensure that such events do not distort the index.

Constituents

The FTSE 100 Index comprises 100 companies, which are reviewed quarterly. Companies can be added or removed based on their market capitalization. The review process ensures that the index remains representative of the largest companies on the LSE.

Significance

The FTSE 100 Index is a key indicator of the performance of the UK stock market and is closely watched by investors, analysts, and policymakers. It is used as a benchmark for investment funds and as a basis for various financial products such as exchange-traded funds (ETFs) and derivatives.

Related Indices

• FTSE 250 Index: Represents the 101st to 350th largest companies listed on the LSE.
• FTSE 350 Index: Combines the FTSE 100 and FTSE 250 indices.
• FTSE All-Share Index: Includes all companies listed on the LSE's main market.

See also

• London Stock Exchange
• FTSE Group
• Stock market index
• Market capitalization
• Exchange-traded fund