PSI-20
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The PSI-20 (an
acronym An acronym is a type of abbreviation consisting of a phrase whose only pronounced elements are the initial letters or initial sounds of words inside that phrase. Acronyms are often spelled with the initial Letter (alphabet), letter of each wor ...
of Portuguese Stock Index) is a benchmark
stock market index In finance, a stock index, or stock market index, is an Index (economics), index that measures the performance of a stock market, or of a subset of a stock market. It helps investors compare current stock price levels with past prices to calcul ...
of companies that trade on
Euronext Lisbon Euronext Lisbon is a stock exchange in Lisbon, Portugal. It is part of Euronext pan-European exchange. The most famous index is PSI-20. Euronext Lisbon trades equities, public and private bonds, participation bonds, warrants, corporate warrant ...
, the main
stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for ...
of
Portugal Portugal, officially the Portuguese Republic, is a country on the Iberian Peninsula in Southwestern Europe. Featuring Cabo da Roca, the westernmost point in continental Europe, Portugal borders Spain to its north and east, with which it share ...
. The index tracks the prices of the twenty listings with the largest
market capitalisation Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by ...
and share turnover in the PSI Geral, the general stock market of the Lisbon exchange. It is one of the main national indices of the pan-European stock exchange group
Euronext Euronext N.V. (short for European New Exchange Technology) is a European bourse that provides trading and post-trade services for a range of financial instruments. Traded assets include regulated equities, exchange-traded funds (ETF), warrant ...
alongside
Brussels Brussels, officially the Brussels-Capital Region, (All text and all but one graphic show the English name as Brussels-Capital Region.) is a Communities, regions and language areas of Belgium#Regions, region of Belgium comprising #Municipalit ...
' BEL20,
Paris Paris () is the Capital city, capital and List of communes in France with over 20,000 inhabitants, largest city of France. With an estimated population of 2,048,472 residents in January 2025 in an area of more than , Paris is the List of ci ...
's
CAC 40 The CAC 40 () () is a Benchmark (computing), benchmark French stock market index. The index represents a capitalization-weighted measure of the 40 most significant stocks among the 100 largest market capitalization, market caps on the Euronext Pa ...
and
Amsterdam Amsterdam ( , ; ; ) is the capital of the Netherlands, capital and Municipalities of the Netherlands, largest city of the Kingdom of the Netherlands. It has a population of 933,680 in June 2024 within the city proper, 1,457,018 in the City Re ...
's AEX. On August 12, 2021 index has been renamed from PSI-20 to PSI.


History

The PSI-20 was initiated on 31 December 1992 with a base value of 3,000 index points. The index experienced considerably more volatility than the world's main financial markets between 1998 and 2000, caused by uncertainty in the world's
emerging markets An emerging market (or an emerging country or an emerging economy) is a market that has some characteristics of a developed market, but does not fully meet its standards. This includes markets that may become developed markets in the future or we ...
: a sharp increase of over 50% in the PSI-20's value in the first four months of 1998 was followed by a decline of similar magnitude between July and October of that year. Another price surge sparked at the tail end of 1999 peaked with the index's highest value to date, 14,822,59 set on 3 March 2000. The Portuguese blue-chip market's subsequent performance has broadly followed the trends set by other
Western Western may refer to: Places *Western, Nebraska, a village in the US *Western, New York, a town in the US *Western Creek, Tasmania, a locality in Australia *Western Junction, Tasmania, a locality in Australia *Western world, countries that id ...
indices, falling in the aftermath of the
dot-com bubble The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Interne ...
before recovering significantly from 2003 onwards.


Annual Returns

The following table shows the annual development of the PSI-20 since 1992.


Rules

The number of constituents of the index (20) is below the generally accepted minimum sample size of 30 required to reach
statistical significance In statistical hypothesis testing, a result has statistical significance when a result at least as "extreme" would be very infrequent if the null hypothesis were true. More precisely, a study's defined significance level, denoted by \alpha, is the ...
.


Selection


Annual review

Prior to a change in the index rules in July 2007, the PSI-20 composition was reviewed twice a year in January and July. In a move to increase the stability of the index, the review frequency was at this time switched to annually, commencing on the first trading day of March 2008 (in line with the BEL20 and AEX). Responsibility for the rules and composition of the index rests with an independent PSI Steering Committee, which publishes any decisions a minimum of one month before they become effective. From the March 2008 reshuffle onwards, prospective PSI-20 companies are required to possess a "trading velocity" (the fraction of the company's
free float In the context of stock markets, the public float or free float represents the portion of Share (finance), shares of a corporation that are in the hands of public investors as opposed to locked-in shares held by promoters, company officers, control ...
shares which have changed hands over the previous calendar year) of at least 10% so as to safeguard the
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...
of the index. All listings on the stock exchange which satisfy this criterion are ranked by the total value (in
Euro The euro (currency symbol, symbol: euro sign, €; ISO 4217, currency code: EUR) is the official currency of 20 of the Member state of the European Union, member states of the European Union. This group of states is officially known as the ...
s) of
shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...
traded in the previous year (thus taking both market cap and liquidity into consideration), and this classification is used to choose the index's constituents. Any existing constituent which falls below 22nd place in the ranking is automatically removed from the index, and any non-constituent which rises above 18th place is added to the index. If existing constituents occupy positions 21 and/or 22, they stay in the PSI-20 provided no non-constituents have risen above 18th position to replace them. Likewise, non-constituents holding positions 19 and/or 20 are not promoted unless a slot in the index is freed up by a constituent falling below 22nd place.


Extraordinary changes

If a company is removed from the index outside an annual review as a result of some extraordinary
corporate action A corporate action is an event initiated by a public company that brings or could bring an actual change to the debt securities—Share capital, equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's ...
(such as a
merger Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
or
delisting Delisting may refer to: * Delisting (Canadian medicare), the removal of medical coverage for a certain operation by Canadian medicare * Delisting (listed building), the removal of protected status from a listed building * Delisting (stock), the ...
due to a takeover), the highest-ranked listing not already in the index is selected to fill the vacancy with immediate effect. This is in contrast to some other Euronext indices such as the AEX, where such slots are not generally filled until the next annual review.


"Fast Entry" rule

If a newly listed company on Euronext Lisbon possesses a market cap and is predicted to have a liquidity which exceeds that of some existing PSI-20 constituents, then a "Fast Entry" rule can be invoked to insert it into the index. This can occur either shortly after its IPO or on the first trading day of September. The existing constituent with the lowest share turnover is removed to free up a space in the index.


Weighting

The PSI-20 is a
capitalization-weighted index A capitalization-weighted (or cap-weighted) index, also called a market-value-weighted index is a stock market index whose components are weighted according to the total market value of their outstanding shares. Every day an individual stock's ...
. The market capitalisation used to calculate the weightings of each stock is the so-called ''free-float band adjusted market cap'', where the free float factor (fraction of shares actively available for trade on Euronext Lisbon) is rounded up to the nearest 5%. The weightings of companies in the index were capped (if necessary) at 20% at each semi-annual review prior to the July 2007 rule change, when the capping limit was cut to 15% in line with Euronext's other benchmark national indexes. Weights are allowed to fluctuate freely after index changes are made, but are capped once again at the next reclassification. The capping factors used to scale down the weightings of the largest companies are recalculated each year at the index review.


Calculation

The index value ''I'' of the PSI-20 index is calculated using the following formula: I_t = \frac with ''t'' the day of calculation; ''N'' the number of constituent shares in the index (usually 20); ''Qi,t'' the number of shares of company ''i'' on day ''t''; ''Fi,t'' the free float factor of share ''i''; ''fi,t'' the capping factor of share ''i'' (exactly 1 for all companies not subject to the 15% cap); ''Ci,t'' the price of share ''i'' on day ''t''; and ''dt'' a parameter known as the index divisor.


See also

* List of Portuguese companies *
List of stock market indices Notable stock market indices include: Global Large companies not ordered by any nation or type of business: * Dow Jones Global Titans 50 * FTSE All-World * MSCI World - Developed, large-cap stocks only * OTCM QX ADR 30 Index * S&P Global 1 ...


References


External links


Euronext quote for PSI-20 Market information
on
Euronext Euronext N.V. (short for European New Exchange Technology) is a European bourse that provides trading and post-trade services for a range of financial instruments. Traded assets include regulated equities, exchange-traded funds (ETF), warrant ...
website
Official Euronext page for PSI-20 IndexBloomberg page for PSI20:IND
{{Euronext topics Euronext indices Economy of Portugal Economy of Lisbon Financial services companies of Portugal