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Changes in the Nikkei 225
Sep 1, 1991
On October 1, 1991, six companies in the Nikkei 225 were replaced. A change in a widely-followed index has implications for both active and passive investors. Passive investors must make trades to keep up with the new index. Active investors for whom the index serves as a benchmark find that an already-moving "target" has suddenly jumped out of their sights. In this report, we'll look at how different the old index is from the new and whether the new index represents any structural shifts in the market. We'll also see how the index has changed along different dimensions, industries, and risk characteristics, and compare the tracking error of the new index to the old one.