Czech Traded Index

The Czech Traded Index (CTX) belongs to a family of currently five Wiener Börse-owned indexes (the so-called CECE Index family) that cover the emerging stock markets of the four Višegrad countries (Czech Republic, Hungary, Poland, Slovak Republic). In contrast to the local PX50 index, the CTX is not primarily intended to qualify as a benchmark for the performance of the Czech stock market. The foremost purpose of the CTX 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 CTX. Correspondingly, the CTX comprises a sample of only 9 Czech blue chip stocks which represent a basket of both relatively liquid and sufficiently tradable Czech stocks. Despite its quite narrow base, the CTX represented 58.7% of the aggregate first tier market capitalization of the Prague Stock Exchange at the base date.

Regarding its construction principle, the CTX - as the other members of the CECE Index family - belongs to the category of capitalization-weighted value ratios with daily chaining. Like the Austrian Traded Index (ATX), the CTX 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, the very disproportionate distribution of firm sizes after the various waves of privatization in the Czech Republic mandated the use of a second stock-specific correction factor. The so-called representation factor is applied in the case of three companies, 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 index stocks. At present, 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 CTX 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.

Czech Traded Index, CTX: Vienna Stock Exchange, Vienna. Text: Institute for Advanced Studies, Vienna, 1998. All rights reserved.

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