The DAX Index tracks 30 large and actively traded German companies within the Frankfurt Exchange, which is the largest financial exchange in Germany. The DAX is the most prominent stock index for Germany, and it is considered to be a proxy for the performance of the German economy and market conditions. The selection of index components is based on free-float market capitalization. The index composition is reviewed quarterly based on the Fast Exist and Fast Entry rules and semi-annually based on the Regular Exit and Regular Entry rules.
To better understand the DAX and what it represents, it is a good idea to review what an index is. An index is a method of tracking the performance of a group of assets with prices in a standardized way. Some examples include the Consumer Price Index (CPI), which is a basket of general consumer goods weighted into an index and is used to measure inflation over time.
VSTOXX 101: Understanding Europe’s volatility benchmark
- DAX is one of the few major country indices that also takes dividends into account in its most popular version, thus fully reflecting the total return of an investment in the index portfolio.
- Like most stock market indices, it is considered a bellwether of the German economy, which is why analysts and investors look closely at how it performs.
- Most stock indexes impose various requirements and hurdles that need to be cleared to be eligible to be listed on the index.
- As such, it is considered a bellwether or barometer of the German economy.
- The companies listed in the DAX are multinational corporations that influence both Germany’s economy and the global economy at large.
It is composed of the 40 largest companies in Germany that trade on the Frankfurt Stock Exchange. Like most stock market indices, it is considered a bellwether of the German economy, which is why analysts and investors look closely at how it performs. But, when it drops, it may mean that investors should prepare for a rough economic patch. The DAX is an important index because it measures the performance of the largest 40 publicly-traded companies in Germany.
Components
DAX member companies represent roughly 80% of the aggregate market capitalization that trades on the Frankfurt Exchange. The index was historically comprised of 30 companies but was expanded to 40 in 2021. Unlike most indices, the DAX is updated with futures prices for the next day, even after the main stock exchange has closed. Changes are made on regular review dates, but index members can be removed at any time if they no longer rank in the top 45 largest companies or added if they break the top 25.
New DAX composite benchmarks expand coverage of German equity market
As such, it is considered a bellwether or barometer of the German economy. DAX is one of the few major country indices that also takes dividends into account in its most popular version, thus fully reflecting the total return of an investment in the index portfolio. The German benchmark is a popular underlying for ETFs, exchange-traded derivatives and investment certificates. While you can’t invest directly in the DAX, there are several ways you can choose other investment vehicles that track its performance. The prices used to calculate the DAX Index come through Xetra, an electronic trading system. A free-float methodology is used to calculate the index weightings along with a measure of the average trading volume.
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The DAX Stock Index is calculated based on the free-float adjusted market-cap weighted index methodology. The DAX Stock Index is a very concentrated index holding only blue-chip companies that are very large and successful. It is very similar to the Dow Jones Industrial Average (DJIA), which is a price-weighted index that includes 30 very large U.S. companies. Companies that are listed on the DAX are multinational companies that operate in multiple countries beyond just Germany. However, they play a large role in terms of making up a significant portion of Germany’s gross domestic product (GDP).
The DAX is a stock market index that measures the performance of Germany’s 40 largest companies. The index’s components represent almost 80% of the Frankfurt Stock Exchange’s aggregate market capitalization. The DAX stock index is a stock index that represents 40 of the largest and most liquid German companies that trade on the Frankfurt Stock Exchange.
- It is composed of the 40 largest companies in Germany that trade on the Frankfurt Stock Exchange.
- The DAX Index tracks 30 large and actively traded German companies within the Frankfurt Exchange, which is the largest financial exchange in Germany.
- But, when it drops, it may mean that investors should prepare for a rough economic patch.
- The DAX is an important index because it measures the performance of the largest 40 publicly-traded companies in Germany.
- The DAX stock index is a stock index that represents 40 of the largest and most liquid German companies that trade on the Frankfurt Stock Exchange.
DAX: A trading impact analysis of the 15% stock cap
The DAX Stock Index was created in 1988 at an index value of 1,000 points. At that time, the DAX companies made up around 75% of the total market capitalization of the entire Frankfurt Exchange. As of July 2020, the DAX Stock Index value is at around 13,000 points. The German blue-chip benchmark climbs to a record even amid a gloomy economic picture at home. Sales of AI and industrial parts are among drivers of corporate earnings growth for DAX component stocks.
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It is considered by many analysts to be a gauge of Germany’s economic health. The companies listed in the DAX are multinational corporations that influence both Germany’s economy and the global economy at large. The success of these companies has greatly contributed to what is known as the “German economic miracle” or Wirtschaftswunder, a term that describes Germany’s rebirth after World War II. The DAX (Deutscher Aktien Index) is a stock index based out of Germany that represents the 30 biggest German companies that trade on the Frankfurt Exchange. Most stock indexes impose various requirements and hurdles that need to be cleared to be eligible to be listed on the index. For example, the S&P 500 Index – which is one of the most reputable U.S. indexes, requires companies to post four straight quarters of profitability before being considered eligible to be listed in the index.
The new benchmarks offer investors the chance to combine different size segments of the German equity market in one index strategy. Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI’s full course catalog and accredited Certification Programs. Index composition is determined on the basis of a clear and publicly available set of rules. Take your learning and productivity to the next level with our Premium Templates.
The companies’ success is a key contributing factor to what is known as “Wirtschaftswunder” or the German Economic Miracle, which refers to Germany’s economic rebirth after the fallout of World War II reparation payments. The German blue-chip benchmark’s largest component has had its weight capped at 15%, a limit designed to preserve the index’s diversification. A STOXX analysis finds that the impact from index trackers selling the shares due to the cap is relatively small, and more so compared to that of active funds observing caps imposed by European regulation. As a blue-chip stock market index, the DAX is very similar to the Dow Jones Industrial Average (DJIA), which also tracks large, publicly owned companies. The vast majority of shares on the Frankfurt Exchange now trade on the all-electronic Xetra system, with a high adoption rate for the stocks of the 40 DAX members.