Mebbe…

As the graph shows, other than a brief if rather spectacular peak during the dotcom boom, the FTSE Aim All-share index has persistently under-performed the FTSE 100 index ever since its creation.

I dunno….quite literally, I don\’t know. But let me put forward this as an idea:

Over the past year, Aim has waved goodbye to stellar performers such as Domino\’s Pizza and Spice, which have moved up to the main market.

If the companies that perform really well leave the market to go up to a main listing, then the market index isn\’t really going to be measuring quite the same thing as that main market index, which doesn\’t have anywhere higher for successful companies to go to, does it?

It\’s not quite survivor bias, but it is something a little like that, no?

3 thoughts on “Mebbe…”

  1. Seems a good point. Also clearly on the chart (why oh why didn’t the start at the axis at 0?) it has underperformed since 1995, but from early 2003 to about 2007 I think it outperformed (it looks like it more than doubles)

  2. Actually, where one index sits “on top” of another in capitalisation terms, there’s an inbuilt underperformance to the “top” index. AIM companies have to outperform their peers in order to gain promotion – and that performance occurs whilst they’re in the AIM index. The opposite is true at the top – an index that has no promotion prospects contains companies that underperform – and they do their underperforming in that index, before then getting demoted due to the underperformance.

    The underperformance of the AIM index is therefore due to something other than promotion / demotion.

  3. AIM has also expanded hugely in this time, somewhat diluting the effect of the large actors as compared to past years.

    The main underperformance is all pinned to those online gambling and chinese mining co’s that went nowhere.

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