Understanding the IBEX 35: Spanish Stock Market Benchmark
The IBEX 35: Spanish Stock Market Benchmark
The IBEX 35 (Iberia Index) is the main benchmark index for the Spanish stock market, developed by Bolsas y Mercados Españoles (BME). It includes 35 listed companies selected from those traded via the SIBE system.
It is an index weighted by market capitalization. This means that, unlike some other indexes like the Dow Jones, not all constituent companies have the same weight. It serves as the official index of the Spanish continuous stock market.
Composition and Reference
The IBEX 35 index is composed of the 35 most liquid securities traded on the computerized trading system of the four Spanish Stock Exchanges. It is used as a national and international reference and serves as the underlying asset for derivatives contracts.
Technically, it is a price index, weighted by capitalization and adjusted by the free float of each company integrated into the index.
Key Features of the IBEX 35
- It is calculated and disseminated in real time.
- Its composition is reviewed and updated every six months (on January 1st and July 1st each year).
- Utility: Monitoring the index provides an idea of the evolution of the Spanish stock market over a given period. Additionally, the IBEX 35 serves as the underlying asset for IBEX 35 futures contracts.
- Adjustments are made in its calculation for stock splits, but the effect of dividends is not considered.
- The values are weighted by capitalization and free float (the capital of the company considered free in the market): If the free float is less than 40%, the weighting in the index uses only 60% of its shares; if it is higher, 100% weighting is applied. This mechanism prevents companies with high capitalization but low public trading (due to controlling shareholders) from disproportionately affecting the index weight.
Index Calculation Formula
For its calculation, a mathematical formula is used that takes into account the market capitalization, the price per number of shares considered by BME for the 35 companies, and applies an adjustment coefficient to ensure that certain exceptional financial transactions occurring within its members do not alter the index value.
Formula Representation:
IBEX 35 (t) = IBEX 35 (t-1) x [Σ Cap (t) / (Σ Cap (t-1) ± J)]
Variables Defined:
- t = Time of index calculation
- c = Company included in the Index
- S = Number of shares eligible for the index value calculation
- P = Price of the shares of the Company included in the index at time (t)
- Cap = Capital of the Company included in the index, i.e., (S × P)
- Σ Cap = Sum of all Capitalization of Companies included in the Index
- J = Number used to adjust the index value for stock splits, etc.