All Ordinaries Index

Published on :

21 Aug, 2024

Blog Author :

N/A

Edited by :

Aaron Crowe

Reviewed by :

Dheeraj Vaidya

What Is The All Ordinaries Index?

The All Ordinaries Index (AOI) is a stock price index that keeps track of the 500 largest companies listed on the Australian Securities Exchange (ASX) based on their market capitalization. It is also known as All Ordinaries or All Ords.

All Ordinaries Index

The index consists of stocks of the most traded Australian companies. It is an example of a benchmark index for evaluating the performance of the Australian stock market. It illuminates the overall performance of the stock market, current trends in the context of the stock market, and how the stock market responds to events and different movements in the economy.

Table of contents
  • The All Ordinaries Index, also known as All Ords, is a stock market index tracking the performance of the 500 largest companies listed on the Australian Securities Exchange (ASX) based on the company's market capitalization.
  • It is an example of a benchmark index for assessing the performance of the Australian stock market.
  • It sheds light on the stock market's overall performance since stocks from the most actively traded Australian corporations make up the index.
  • All Ords is not a comprehensive picture of what the investors return because it does not account for any dividends that a company distributes.

All Ordinaries Index Explained

The All Ordinaries Index (ticker symbol: XAO) is an example of a capitalization-weighted index. It focuses on the information based on the market capitalization values of companies. Focussing on market capitalization implies that several ASX firms' aggregate market value (AMV) is the foundation for All Odds. Market capitalization calculations involve multiplying the share price value by the total number of shares issued. In other words, the number of shares in circulation is multiplied by the current share price to specify a company's market value or market capitalization.

The stock market All Ordinaries Index is not a comprehensive picture of what investor returns because it does not account for any dividends that a company may pay to shareholders. But the All Ordinaries Total Return Index (XAOA), which considers all cash dividends reinvested on the ex-dividend date excluding the franking credit, may be used as a yardstick for the overall investor performance of the top 250 ASX-listed companies by market capitalization. The All Ordinaries Accumulation Index was the predecessor to the All Ordinaries Total Return Index.

A company must maintain an average turnover on the ASX of at least 0.5 percent of its quoted shares per month to be eligible for inclusion in the All Odds. In addition, a market value of at least 0.2 percent of all domestic equities listed on the ASX is also required. A large number of companies meet these above requirements. Therefore, larger companies' share price changes impact the All Odds more than smaller companies.

At the end of each month, the index portfolio adjustment is active to ensure the companies consistently match the requirements. Additionally, updates are made throughout the month as changes occur in the company in the form of delistings, additions, mergers and acquisitions, and capital reconstructions.

History

The history of the All Ordinaries Index dates back to January 1980. It is the oldest index in Australia. The ASX All Ordinaries Index comprises around 500 companies on the stock exchange. The index's base value in the initial phase was 500. The restructuring of the index occurred in 2000 to include the 500 largest companies following market capitalization criteria. The introduction of new indices like new indices S&P/ASX 200 in 2000 has greatly reduced the significance of the All Ords. Furthermore, the index first experienced a record high of 7,956.30 on 5 January 2022.

Over three-quarters of Australia's share market is represented by the AOI components. A committee from Standard & Poor's (S&P) and the Australian Securities Exchange selects the members (ASX). The market capitalization threshold for a new entrance is $40 million. Since it includes all company sizes except micro-caps, investors place high importance on it. Until 2000, it served as Australia's main index for over 20 years. There aren't any Exchange Traded Funds (ETFs) that follow the performance of the All Ordinaries.

Chart

The chart of the All Ordinaries Index (^AORD) below consists of the data spanning from 1 November 1984 to 21 October 2022. The amount depicted is in AUD.

All Ordinaries Index Chart
Source

Frequently Asked Questions (FAQs)

What is the All Ordinaries Accumulation Index?

The All Ordinaries Total Return Index was once known as the All Ordinaries Accumulation Index. The All Ordinaries Total Return Index (XAOA) differs from the All Ords since it considers all cash dividends reinvested on the ex-dividend date, given that franking credits are excluded. As a result, it can be used as a benchmark for the overall investor performance of the top 250 ASX-listed entities by market capitalization. At the same time, All Ords is not a comprehensive picture of what the investor returns because it does not account for any dividends that a company distributes.

What does the All Ordinaries Index show?

The All Ordinaries Index tracks changes in share prices as a result of individual and corporate shareholders trading their ownership stakes in listed companies on the ASX. It monitors the performance of the top 500 ASX-listed firms ranked based on market capitalization. The main parameter they use is the market capitalization value. A company's market capitalization, also known as market cap value, is determined by multiplying the total number of shares issued by the share price.

How many companies are in All Ordinaries Index?

The 500 largest ASX-listed companies make up the index. These companies represent a significant portion of the Australian share market, and the market capitalization threshold for every new entry is $40 million. A committee from Standard & Poor's (S&P) and the Australian Securities Exchange selects the members (ASX). The market capitalization of each company listed on the Australian Securities Exchange (ASX) determines its ranking. 

This has been a guide to What is All Ordinaries Index. Here, we explain the ASX All Ordinaries stock market index, its history, and the chart. You may also find some useful articles here -