The Nikkei 500 Stock Average (Nikkei 500 Average) is a price-weighted stock index adjusted by "Dow adjustment", same as the Nikkei 225. The Nikkei Stock Average by Industry based on the 36 Nikkei industrial classifications are calculated concurrently as the sub indexes of the Nikkei 500 Average.
The Nikkei 500 Average is comprised of 500 stocks selected from domestic common stocks in the 1st section of the Tokyo Stock Exchange, excluding ETFs, REITs, preferred equity contribution securities, tracking stocks (on subsidiary dividend) etc other than common stocks.
The presumed value is set for each component, which succeeds "par value system" used to be introduced for Japanese stocks, and the each component stock price is adjusted by the presumed par value. The Nikkei 500 Average is calculated by dividing the summation of the adjusted prices by the divisor. The purpose of the divisor is to maintain the continuity of the index by eliminating the effect of external factors not directly related to the market movement in calculating the price-weighted index. This method using the divisor is called "Dow adjustment".
Change in constituents
The components are changed at the beginning of April every year based on the Annual Review. The selection shall be conducted based on the rankings of trading volume, trading value and market value in the past 3 years, and the top 500 stocks are selected. When a component is delisted due to its bankruptcy and the reorganization of its company group etc, the stock would be deleted from the index and a new component would be added, following the procedure of the Extraordinary Replacement.
Base date etc
The commencement date of the calculation was January 4th, 1982 (calculated retroactively back to January 4th, 1972). The Nikkei 500 Average is currently calculated every 1 minute while the Tokyo Stock Exchange opens.