The Hungarian Traded Index
The Hungarian Traded Index (HTX) belongs to a family of currently five ÍTOB-owned indexes (the so-called CECE Index family) that cover the emerging stock markets of the four Visegrad countries (Czech Republic, Hungary, Poland, Slovak Republic). In contrast to the local BUX index, the HTX is not primarily intended to qualify as a benchmark for the performance of the Czech stock market. The foremost purpose of the HTX is to serve as an underlying for derivatives trading. Therefore the main emphasis lies on ensuring the tradability of each component stock and on preserving the replicability of the HTX. Correspondingly, the HTX comprises a sample of only 11 Hungarian blue chip stocks, which represent a basket of both relatively liquid and sufficiently tradable Hungarian stocks. Regardless of this guiding principle, the HTX reaches an extraordinary 88.7% of the aggregate market capitalization of the Budapest Stock Exchange at the base date.
Like the other members of the CECE Index family, the HTX has been constructed as a capitalization-weighted value ratio with daily chaining. Similar to the Austrian Traded Index (ATX), the HTX incorporates stock-specific free float factors which are intended to ensure that the weight of a particular stock roughly corresponds to the fraction of the registered capital that is actually available for public trading on the stock exchange. These free float factors are set to 0.5 for stocks with a free float equal to or less than 50% and to 1 otherwise.
Given the narrow sample of index stocks, due to the disproportionate distribution of firm sizes in the wake of Hungarian privatization, it was considered indispensable to amend the basic formula by yet another stock-specific correction factor. The so-called representation factor is applied in the case of three companies (Mol, Richter Gedeon, OTP Bank), whose high market capitalization would otherwise unduly distort the representativeness of the index. The inclusion of representation factors is considered as temporary until a broader index base sufficiently diminishes the weight of individual component stocks. The representation factor assumes a value of 0.5 so as to reduce the accountable market capitalization of a certain company by 50%.
Since the HTX is intended to reflect only price changes caused by market fluctuations, the index is adjusted for technical price changes except for those due to dividend payments. If a stock is suspended from trading, the last available price is used for calculating the index.
Hungarian Traded Index, HTX Wiener Börse AG (Vienna Stock Exchange). Text: Institute for Advanced Studies, Vienna, 1998. All rights reserved.
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