There are three basic indicators for Spanish equities: the Madrid General Index, the Total Index, and the IBEX 35, which serves as an underlying asset for futures and options trading. From these indexes, the General Index is the one with the longest history. To the best of our knowledge, this index is the theoretically most accurate official price index published in Europe. The Madrid General Index is constructed under the hypothesis that dividends are earned during the entire business year, and thus before the actual dividend payment each stock price has to be lowered by some monotonously decreasing estimated fraction of the dividend, and starting with the day a stock goes ex-dividend, on each some monotonously increasing estimated fraction of the dividend has to be added to its price.

Formally, the General Index is calculated as a weighted sum of nine branch indexes which are, in turn, constructed as Laspeyres type price indexes. The stocks that are included in the index sample are chosen according to market capitalization, the frequency of trading, and liquidity.

Conceptually, the Total Index differs from the General Index only in that it is constructed as performance index. Dividends are reinvested in the stock of the disbursing company at the ex-dividend price.

The IBEX 35 is the official index for the market segment of continuously traded stocks. The index sample is composed of the 35 most actively traded stocks in cash pesetas among the securities quoted on the Joint Stock Exchange System of the four Spanish stock exchanges during the control period. The index is semi-annually revised with the supervision period for the stocks to be included in the IBEX 35 being represented by the interval of six months prior to the start of each calendar semester. Turnover resulting from special operations, however, is deducted from registered turnover. Special operations are those involving a shift in the stable shareholdings of a company.

A stock can be withdrawn from the index if

  • a large fraction of total turnover has been contracted by only one stockbroker or has been contracted during a period of time which is considered to be too short to be representative,
  • it has been subject only to a small number of transactions,
  • it suffers from a serious drop in liquidity, or
  • if it has been suspended from trading on the stock market for a period of time that is considered significant.
If a security is suspended from trading, the index is calculated using the price at which the last transaction was made prior to the suspension of the respective stock. Following the close of the market, the closing price is calculated as specified above.

The IBEX 35 is not adjusted for dividend payments or the synthetical value of subscription rights to convertible bonds on their date of issue.

IBEX 35: Association of Stock Exchanges (Sociedad de Bolsas S.A.). Text: Institute for Advanced Studies, Vienna, 1998. All rights reserved.

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