Gifu Shimbun Digital explains the characteristics of the Nikkei 225 and TOPIX and the background to divergences between their market movements, citing specific examples of days in the first half of this year when the gap between the two indices was particularly wide.
The Nikkei 225 is a price-weighted index that is more susceptible to the influence of high-priced stocks, and its daily movements vary according to its constituent stocks. TOPIX, by contrast, is market-capitalization weighted, with the index moving according to the combination of the number of shares outstanding and share prices.
TOPIX is more commonly used in practice as a benchmark, but the Nikkei 225 is generally better known and more convenient to use, so explanations and comparisons of the two indices have been set out in writing.
Taking the first half of this year as an example, 9 March and 7 May are cited as days when the difference between the Nikkei 225's and TOPIX's percentage changes was particularly large. Attention is drawn not only to the difference itself but also to the range of movements in both directions. In addition, 28 April is identified as another date on which the two indices diverged.
These differences are explained through the gap between the two indices' percentage changes on the same day and an analogy involving the water level and volume of water in a tank. The explanation emphasizes that the Nikkei 225 can move more sharply in some situations, while TOPIX is more susceptible to movements in larger stocks.