The Nikkei 225 Stock Average is a price-weighted average that tracks the larger market, giving a good indication of financial and economic conditions in Japan, as well as other parts of Asia, and the world. The Tokyo Stock Exchange is the world's second-largest stock exchange market, behind the New York Stock Exchange.
Some call the Nikkei the Japanese equivalent of the U.S. Dow Jones Industrial Average, with the Nihon Keizai Shimbun newspaper functioning like the Wall Street Journal to organize and keep track of the Japanese index.
The newspaper chooses the 225 stocks in the index from the 2,400 listed on the Tokyo Stock Exchange and updates them periodically to make sure the member stocks are highly liquid and representative of Japan's industrial structure. The Nikkei, also called the Nikkei average and the Nikkei index, was introduced in 1950.
Stocks in the benchmark index come from a broad variety of sectors, including food, textiles, chemicals, pharmaceuticals, metals, retail, banking, communiciations, and services. If an investor wanted to get a little piece of Japan's leading stocks, she could buy an exchange-traded fund tracking the Nikkei 225.
The Nikkei index is also traded as a futures index, meaning investors can speculate on the performance of the Japanese stock market by buying and selling Nikkei 225 Stock Average indices.
The Nikkei 225 closed 2007 at 15,307.78, after a high of 18,261.98 on July 9 and a low of 14,837.66 on Nov. 21.
Of course, there are other indexes created by Nikkei (the newspaper) to track different portions of the market. They have Nikkei in their names as well. But, in general, talking of "the Nikkei" means the Nikkei 225.