Copenhagen Stock Exchange Index KFX

KFX
Long name	Københavns Fondsbørs Index
Owner/sponsor/publisher	Copenhagen Stock Exchange
Number of constituents	20 Danish companies
Construction principle	Capitalization-weighted value ratio
Base date/base value	July 3, 1989 / 100.00
Interval of calculation	1 minute
Source: Copenhagen Stock Exchange, 1994.

Two official indexes are calculated by the Copenhagen Stock Exchange: the KFX and the Total Share Index. Since its introduction in 1989, the KFX became the leading representative of the price dynamics of Danish stocks. Adjustments of the index are aimed at securing that the KFX is not altered as a result of stock price changes other than those originating from changes in supply and demand.

The index portfolio is determined in November each year from among the stocks included in the calculation of the Total Share Index. Since unit trusts, foreign companies, and certain holding companies are not included in the total index, they are not eligible for the KFX either (Copenhagen Stock Exchange, 1994). The selection procedure is as follows:

• for each trading day during the 12-month period prior to the selection date the 25 most active stocks are ranked according to turnover;



• for initial public offerings and new classes of stock that are listed for at least 40 trading days prior to the selection date, the number of days during the reference period in which the stock is ranking among the 25 most active stocks is multiplied by the number of days of the year and divided by the number of days that particular stock has been listed on the Copenhagen Stock Exchange. This procedure ignores the first five days of listing, however, since after the first listing a non-representatively high trading activity may occur in the respective stock;



• on the basis of the daily ranking during the reference period, the final list of the 25 most liquid stocks is prepared. This list contains the stocks which are most often ranking among the top 25 stocks according to liquidity;



• from this "basic portfolio", 20 stocks are selected in the order of their market capitalization to constitute the so-called "active portfolio" of the KFX.

Index adjustments are carried out in the case of stock replacements, suspensions from trade that last for a longer or indefinite period of time, seasoned issues, and mergers and acquisitions.

The Total Share Index has been calculated by the Copenhagen Stock Exchange (1992) since March 1968. The base value of the index was set to 100.00 on May 1, 1967. Besides the broad-based Total Share Index there are four branch indexes, viz. insurance and transport, shipping, industry, and banks and commerce. From January 1, 1973, onwards the latter index was supplemented to what became then an index to represent banks, commerce, and the communication industry. In 1983 the number of branch indexes was increased to six. To wit,

• banks
• insurance
• commerce and service
• shipping
• industry, and
• investment trusts.

At each of these dates the index was normalized to 100.00 (Copenhagen Stock Exchange, 1995).

The Total Share Index is constructed as a chain-linked capitalization-weighted Laspeyres index. Except for unit trusts, East Asiatic Holding, GN Holding, and foreign companies all companies listed on the Copenhagen Stock Exchange are included in the Total Share Index. If both class A and class B shares are listed on the exchange, then both classes are included in the index sample.

The index draws upon the concept of distributed dividend payments to prevent the index from experiencing artificially large fluctuations during the annual dividend season.

References:

Copenhagen Stock Exchange (1992): Calculation of the Total Share Index, Copenhagen Stock Exchange, Copenhagen.

Copenhagen Stock Exchange (1994): Directions for the Calculation of the KFX-Index, Copenhagen Stock Exchange, Copenhagen.

Copenhagen Stock Exchange (1995): Exhibit A - Total Share Index of Copenhagen Stock Exchange, March 1968-March 1995, Copenhagen Stock Exchange, Copenhagen.

Institute for Advanced Studies, Vienna, 1997. All rights reserved.

This page is part of the European Stock Market Indexes Website of the Institute for Advanced Studies in Vienna, Austria. Text by Christian Helmenstein. No part of this page or the European Stock Market Indexes Website may be reproduced, stored in a retrieval system, or transmitted without the prior permission of the copyrightholder(s), subject to the exceptions provided for by law. In any case, proper reference would be: "European Stock Market Indexes Website, page title, Institute for Advanced Studies, Vienna (http://www.ihs.ac.at/fin/finix/direct.html)." For further information on stock market index construction principles (NOT: data sources etc.) contact the IHS Financial Indicators Research Group. No liability assumed.