MIB 30 Index

MIB 30
Long name	Milano Italia Borsa 30 Index
Owner/publisher/sponsor	Italian Stock Exchange Council
Number of constituents	30 Italian companies
Construction principle	Capitalization-weighted Laspeyres index
Base date/base value	December 31, 1992 / 10000.00
Interval of calculation	1 minute
Source:	Italian Stock Exchange Council, 1996a.

The MIB 30 is a capitalization-weighted index of the Laspeyres type. Being based on the 30 leading stocks, that is, the most liquid and most highly capitalized stocks listed on the Italian Stock Exchange, the sample of index stocks accounts for over 70% of the total market capitalization and about 75% of total trading volume. Moreover the MIB 30 is highly correlated with the Mibtel Index, the general share index: the correlation coefficient for the period from October 1994 to December 1995 reaches 0.9905 (Italian Stock Exchange Council, 1996a). Due to its high degree of representativeness, the MIB 30 has been selected as underlying for two stock index derivatives products traded on the Italian Derivatives Market IDEM (Italian Stock Exchange Council, 1996b, 1996c, 1996d).

The stocks to be included in the index sample are selected according to the following procedure (Italian Stock Exchange Council, 1996e):

• For each domestic stock the average market capitalization and the average trading volume are calculated for a six month period ending 15 days before the update of the index sample. These two figures are used to calculate the "share alpha" ratio as

• The same ratio is calculated for the entire market, called "market alpha".
• To reflect both market capitalization and turnover in a single summary measure, called indicator of liquidity and capitalization (ILC), the next step is to compute

• From an ordering of stocks according to their ILC_i the top 30 stocks are selected for inclusion in the index. If a company has issued more than one class of stock, only the class with the highest ILC_i is allowed in the index.

The composition of the index sample is regularly revised twice per year, usually in March and September. Extraordinary revisions are possible whenever they are considered necessary, in particular in the case of stock splits as well as new listings with a market capitalization exceeding 3% of the entire market capitalization including the new stock. Since there are no provisions to limit the eligible market capitalization of a single stock to a certain maximum fraction of the aggregate market capitalization of the index sample, the stocks of ENI, a public utility that has been privatized in several stages since November 1994, now ranks first in terms of market capitalization with a weight of 19.3% in the MIB 30 on December 12, 1995 (Italian Stock Exchange Council, 1996a, 1996f).

Stocks may be withdrawn from the index sample between two consecutive revisions in the case of

• delistings of the stock
• suspensions from trading for more than 10 trading sessions, and
• other events which make it reasonably certain that the stock has lost liquidity and/or market value (Italian Stock Exchange Council, 1996e).

In these cases replacements are made drawing upon the stocks with the next highest ILC_i as calculated for the last regular revision, and the weights of the individual index stocks are adjusted accordingly.

In contrast to the MIB 30, the MIB and the MIBTEL are open based indexes, that is, whenever considered appropriate stocks are added to or removed from the index sample (Italian Stock Exchange Council, 1996g).

References:

Italian Stock Exchange Council (1996a): The MIB 30 Index, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996b): IDEM - The Italian Derivatives Market, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996c): IDEM Stock Options, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996d): IDEM MIB 30 Index Option, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996e): Rules of Calculation of the MIB 30 Index, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996f): Facts and Figures on the Italian Stock Exchange, Italian Stock Exchange Council: Milan.

Italian Stock Exchange Council (1996g): Share Price Indices of the Italian Stock Exchange, Italian Stock Exchange Council: Milan.

	MIB: Italian Stock Exchange Council, 1996;
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