SAVI top 40

Definition

The SAVI Top 40, also known as the South African volatility index top 40, is an index that tracks the performance of the top 40 companies listed on the Johannesburg Stock Exchange.

What is SAVI top 40?

The SAVI Top 40 index consists of the 40 largest companies by market capitalisation listed on the JSE. These companies represent a diverse range of sectors and the selection of constituents is based on their market capitalisation, ensuring that the index includes the most significant players in the South African equity market.

Unlike traditional market capitalisation-weighted indices, the SAVI top 40 uses a volatility-based weighting method to determine the weight of each constituent in the index. This approach aims to reduce the impact of highly volatile stocks on the index performance and provide a more stable investment outcome for investors. Companies with lower historical volatility are assigned higher weights in the index, while those with higher volatility are assigned lower weights.

The SAVI top 40 index serves as a benchmark for evaluating the performance of South African equity funds, exchange-traded funds (ETFs), and other investment products. Investors can use the index as a reference point for assessing the relative performance of their investment portfolios or as the basis for constructing index-tracking or passive investment strategies.

As the top 40 companies listed on the JSE, the constituents of the SAVI top 40 index are considered representative of the South African equity market’s overall performance. Changes in the index composition reflect shifts in market dynamics and economic conditions, providing valuable insights into the health and direction of the South African economy.

Example of SAVI top 40

An example of the SAVI top 40 index in action would be an investor tracking the performance of a portfolio that replicates the index. If the SAVI top 40 index experiences a period of heightened volatility due to economic uncertainty, the investor’s portfolio would also reflect this volatility. Conversely, during periods of relative stability in the market, the investor’s portfolio would demonstrate steadier returns consistent with the index’s performance.