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Okay, so we know what the PSEI is and why it matters, but how is it actually calculated? This might sound a bit technical, but don't worry, we'll break it down for you. The PSEI is calculated using a *price-weighted* methodology. This means that companies with higher stock prices have a greater influence on the index's value. The PSEI's calculation involves a base value, which was set at 100 points on January 4, 1988. The index's value is then calculated by summing the market capitalization of the 30 component stocks and dividing it by a divisor. The divisor is a figure that is adjusted periodically to account for stock splits, stock dividends, and other corporate actions that might affect the index's value.
