TOKYO -- Nikkei will change the rules for calculating the Nikkei Stock Average (Nikkei 225) and selecting its constituent stocks, effective as of this October.
Under the new rules, a new "price adjustment factor" will determine the price levels of constituents instead of "presumed par values." Market prices will in principle be used when a new stock is added to the constituents, but if excessively high, a price adjustment factor other than 1 will be applied to lower a price to a specified threshold to reduce its impact on the index.
Prior to the decision, Nikkei invited a wide range of outside opinions from May to June and concluded that it had gained sufficient endorsement for the proposed changes.
The proposed revisions will set an upper limit on the number of regular replacements of constituent stocks, with a maximum of three. In addition, in line with the change in market classifications of the Tokyo Stock Exchange, constituent stocks will no longer be selected from the TSE first section, but rather from the TSE prime market, starting in April 2022.
Details are posted on Nikkei Indexes, the official website of the Nikkei Stock Average (https://indexes.nikkei.co.jp/en/nkave).