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I have a day's worth of LSE data (FTSE100 companies) and I also have their weightings for the FTSE100.

Ignoring the net present value of money, how do I calculate the current value of the FTSE? I have multiplied the price of each underlying by its weighting and summed up but im not getting anything sensible?

To confirm, here are some of the weightings I have (circa July 2013):

  • Vodafone: 5.658561
  • Royal Dutch Shell(A): 5.00384
  • Royal Dutch Shell(B): 3.513914

So is it just:

(VOD_price x 5.658561) + (RDSA_price x 5.00384) + (RDSB_price x 3.513914).....

or do I need to divide the weightings by 100 and do like above?

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2 Answers 2

You need to read up on how the FTSE is calculated. See this link: http://www.ftse.com/Indices/UK_Indices/Downloads/uk_calculation.pdf. It involves the market value of companies, not simply a weighted price average. There is a detailed example in the document I linked, which happens to be the very first Google result for "ftse index calculation".

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I found that after I posted- but now I am confused. They don't use the weightings at all?? I assmume for FTSE100 the exchange rate and FFF are 1.0 for all 101 constituents? –  user997112 Dec 7 '13 at 2:49
    
@user997112 its based on market cap not just price itself also free float(ftse.co.uk/Indices/FTSE_Index_Standards/Free_Float.jsp), total market cap of the first day etc.. contributes to the calculation. to me the formula is not difficult to understand but you will need historical and fundamental data to support your calculation which is not straight forward thing to do. –  Xin Dec 10 '13 at 16:41

When a person (or group) owns a large block of stock the FFF is going to be less than 1.0. For example if Mr. Bill Gates owns 20% of MSFT, the FFF for MSFT is going to be 0.8.

The weighting is based on FFF times the value of shares outstanding. So because MSFT has such a large market capitalization (shares * price) it has a bigger weight that ACME, a small company that no one has heard of.

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