An all share index is a stock market index designed to cover all, or almost all, of the companies listed on a stock exchange, rather than a selected group of the largest. It gives the broadest single measure of how a country's listed shares are performing and is often used as the benchmark for funds that invest across the whole market.
The name is used by several markets. The best known is the FTSE All-Share Index in the United Kingdom. Others include the Pakistan Stock Exchange (PSX) All Share Index, often still called the KSE All Share Index, Nigeria's NGX All-Share Index and the Colombo Stock Exchange's All Share Price Index in Sri Lanka. Each sits beside a narrower headline benchmark, such as the FTSE 100 or the KSE-100 Index.
Suppose a school wants to know how its pupils did in an exam. One approach is to average the marks of the top hundred students; another is to average every student who sat the paper. The first tells you how the high achievers did; the second tells you about the whole school. A headline index like the KSE-100 is the first kind of average, and an all share index is the second.
Most of the time the two move together, because the biggest companies dominate both. They part ways when small and medium-sized companies have a very different run from the giants, and the all share index is the one that picks this up.
Most all share indices are weighted by market capitalization, so large companies still carry most of the weight even though every eligible company is included. Rules vary on what counts as eligible. Providers usually exclude investment trusts or funds, suspended shares and securities that rarely trade, and some apply a free-float adjustment that counts only shares available to the public.
A typical index divides total counted market value by a divisor that fixes the index at a chosen base value, such as 1,000, on its start date. Because an all share index has many more constituents than a top-100 index, it needs more frequent maintenance: new listings are added, delistings and takeovers removed, and the divisor adjusted so that these changes do not move the index by themselves.
The FTSE All-Share, run by FTSE Russell, part of the London Stock Exchange Group, combines three narrower indices: the FTSE 100 (the largest companies), the FTSE 250 (the next tier) and the FTSE SmallCap. FTSE Russell states that it covers 98–99% of UK market capitalisation. Its history goes back to the FT-Actuaries All-Share Index of 1962, created jointly by the Financial Times and the actuarial profession, which made it a long-standing benchmark for UK pension funds and insurers.
Because the FTSE 100 makes up most of its value, the All-Share often moves closely with it. The difference shows up in periods when domestically focused mid-sized companies, which make up much of the FTSE 250, diverge from the large multinationals that dominate the FTSE 100.
In Pakistan, the All Share Index covers the companies listed on the Pakistan Stock Exchange. State Bank of Pakistan statistical bulletins report it with a base of 1,000 set in 1995, alongside the KSE-100 with its 1991 base. It is the widest measure of Pakistan's listed equity market, which has been organised as a single national exchange since the Karachi, Lahore and Islamabad exchanges were integrated into PSX in January 2016.
The KSE-100 captures most of the market's free-float value, so the two indices usually move in the same direction. The All Share Index is more useful when looking at overall market breadth, for example whether gains are spread across many sectors or concentrated in a few large banks, energy companies and fertiliser makers. PSX also publishes sector and Shariah-compliant indices for investors following Islamic finance principles.
Uses and limitations
All share indices are used for:
- Benchmarking. Broad-market and passive funds, including many exchange-traded funds, measure themselves against the whole market rather than its largest names.
- Economic analysis. Researchers use the total value of listed shares, captured by the index, to compare the size of the capital market with GDP or with the banking system.
- Market breadth. Comparing an all share index with a top-100 index shows whether a rally or fall is broad or narrow.
The approach has drawbacks. Including thinly traded small companies makes a fund that copies the index more expensive to run, since buying hundreds of shares with little liquidity costs more in spreads and commissions paid to a broker. Prices for rarely traded shares may be stale, which can make the index look smoother than the market really is. And because large companies still dominate the weighting, "all share" does not mean that each company counts equally.
Investors also need to know whether a given series is a price index or a total-return index, which assumes dividends are reinvested. Over long periods the gap between the two can be large because of compounding, and comparing a total-return series with a price-only one, or comparing returns across currencies without allowing for the exchange rate, gives a misleading picture. Long-run comparisons with bonds or bank deposits should also allow for inflation.