The S&P/ASX 200 is an Australian stock market index, created and maintained by Standard & Poor's (S&P). It tracks the value of the 200 largest public companies ranked by their market capitalisation, adjusted for the shares that are actually available on the market. 

How is the ASX 200 calculated?

This is a called a 'market capitalisation-weighted free float-adjusted' index.

Wow, what a mouthful!

Basically, company's are ranked using their market capitalisation and the biggest 200 are included in the index. Market capitalisation equals share price multiplied by the number of shares on issue (share price x number of shares).

For example, if Orange Phones has 200 shares currently priced at $5, its market capitalisation is $1,000 (200 x $5).

The companies with the largest market capitalisation make up the largest part of the index. 

The index excludes companies which have a big chunk of their shares not listed on the market. After all, if no-one else is likely to invest in them, they shouldn't be included.

Why does the ASX 200 go up and down?

The S&P/ASX 200 will increase if enough companies see their share prices rise, and fall when they are sold down. 

S&P updates and changes companies in the index each quarter (if needed) to ensure that only the largest 200 companies on the market are indeed included in the index. 

Who uses the ASX 200?

Some of the largest passive managed funds and exchange-traded funds (ETFs) are designed to track the ASX 200, while many professional investors use it as a benchmark for their investing performance.

Test Your Knowledge

Which company is more likely to 'move the ASX 200' up or down?

According to the S&P/ASX 200 index methodology, a company's size is calculated as its adjusted market capitalisation (share price x the number of shares). By design, larger companies have greater 'market capitalisations' and influence over the market (aka S&P/ASX 200).

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