The Financial Times Industrial Ordinary Share Index (FT 30) is a significant stock market index that tracks the share prices of 30 leading UK industrial and commercial companies listed on the London Stock Exchange. This index notably excludes banking and insurance shares and government stocks. The FT 30 was established with a base value of 100 in 1935.
Historical Context
The FT 30, one of the oldest stock indices, was introduced to provide a measure of the performance of leading industrial and commercial companies in the UK. This initiative began in the mid-1930s, during a time of economic recovery following the Great Depression.
Key Events
- 1935: Inception of the FT 30 with a base value of 100.
- Post-WWII Period: The index served as a benchmark for the UK’s post-war economic recovery.
- Late 20th Century: The FT 30 remained an important indicator despite the emergence of broader indices like the FTSE 100.
Detailed Explanation
The FT 30 index includes a selection of prominent industrial and commercial companies, providing a snapshot of market trends within these sectors. By excluding banking, insurance shares, and government stocks, the index focuses solely on industrial activities.
Mathematical Models
The index value is calculated as follows:
Index Value = \( \frac{\sum (P_i \cdot S_i)}{D} \)
where:
- \( P_i \) = Current price of the stock
- \( S_i \) = Shares outstanding
- \( D \) = Divisor, adjusted for stock splits, dividends, and other relevant changes.
Importance
The FT 30 is critical for historical analysis of the UK stock market, serving as a barometer for the industrial sector’s health over time. It allows investors to track the performance of the UK’s industrial companies independently of financial sector volatility.
Applicability
Investors, analysts, and policymakers use the FT 30 to:
- Compare historical performance of the industrial sector
- Identify trends within the industrial sector
- Make investment decisions based on sector-specific data
Types/Categories
- Industrial Companies: Manufacturing, mining, and production firms.
- Commercial Companies: Retail and distribution firms.
Examples
- Unilever: A staple in the FT 30, representing consumer goods.
- British American Tobacco: Illustrates the commercial sector within the index.
Considerations
Investors should consider:
- The exclusion of financial companies might not give a complete picture of the market.
- Historical context may skew comparisons with modern indices.
Related Terms
- FTSE 100: A broader index that includes 100 major companies.
- Dow Jones Industrial Average (DJIA): The American equivalent focusing on 30 major US industrial companies.
Comparisons
- FT 30 vs FTSE 100: The FT 30 is narrower, focusing solely on industrial and commercial sectors, while the FTSE 100 includes financial institutions and a more diversified range of companies.
Interesting Facts
- Longevity: The FT 30 has been in operation for over 85 years.
- Legacy: It paved the way for more comprehensive indices like the FTSE 100.
Inspirational Stories
- Post-War Recovery: The FT 30 showed significant growth, reflecting the UK’s robust post-war industrial recovery.
Famous Quotes
- “The stock market is a device for transferring money from the impatient to the patient.” - Warren Buffett
Proverbs and Clichés
- “A rising tide lifts all boats” – referring to overall market growth lifting individual stocks.
Expressions, Jargon, and Slang
- Blue Chip: High-value, high-stability companies, many of which are part of the FT 30.
- Bull Market: Periods when the FT 30 sees significant increases.
FAQs
What is the base value of the FT 30?
The base value was set at 100 in 1935.
Does the FT 30 include banking and insurance companies?
No, the FT 30 excludes banking and insurance shares.
How is the FT 30 calculated?
It is calculated based on the sum of the current price of included stocks, multiplied by their outstanding shares, and divided by an adjusted divisor.
References
- Financial Times Historical Data
- London Stock Exchange Archives
Summary
The Financial Times Industrial Ordinary Share Index remains a valuable historical benchmark for UK industrial and commercial sectors. Despite being overshadowed by broader indices like the FTSE 100, it continues to provide insights into the performance and trends of the industrial sector. Understanding its historical context, methodology, and relevance allows for a comprehensive appreciation of this significant financial measure.
