The adjustment factor plays a key role in the calculation of indices. It is essential for an index that changes in the total market capitalization of the index – resulting from changes in the index composition or from capital actions taken by individual index constituents – do not affect the index level. This is where the adjustment factor comes into play. Its purpose is to offset shifts so that the index level remains at the same level before and after the operational adjustment. The corresponding operational index adjustments are technically implemented after the index calculation is completed on the last trading day before the change takes effect.
The adjustment factor is set at 1.00 on the start date and then changes continuously in response to any capital actions that affect the index capitalization. For all indices based on the value index formula, the adjustment is calculated as follows:
(New AF = old capitalization / new capitalization × Old AF)
