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The UK Stock Market Almanac 2016: Seasonality analysis and studies of market anomalies to give you an edge in the year ahead by Stephen Eckett

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Which index should you be tracking?

How do you calculate the average performance of a stock market?

This is a harder question to answer than it may at first seem. For example, the FTSE 100 is a measure of the aggregate market capitalisation of the 100 companies in the index. The problem is that the index is greatly influenced by the larger companies in it (the five largest companies in the index account for 24% of the total market capitalisation, while the 21 smallest companies in the index account for only 5% of total capitalisation).

So, how representative is the FTSE 100 of the average performance of the 100 component companies?

In the following chart, the columns show the proportion of FTSE 100 companies that outperformed the index in each ...

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