DAX Stock Index
The DAX (Deutscher Aktienindex) is Germany’s leading stock market index, representing 40 of the largest and most liquid blue-chip companies traded on the Frankfurt Stock Exchange. It is seen as a benchmark for the German economy and investor sentiment in the country. The index was created in 1988 by the Frankfurt Stock Exchange and mirrors the movements of the broader German stock market.
Components and Selection Criteria
Eligibility Criteria
To be included in the DAX, companies must:
- Have their shares listed in the Prime Standard segment, which requires adherence to international transparency standards.
- Be Xetra-traded continuously and to have a minimum free float of 10%.
- Be one of the largest companies in terms of order book volume and market capitalization.
- Meet certain financial criteria, ensuring the company is among the top-ranking firms in terms of trading volume and market value.
Rebalancing
The composition of the DAX is reviewed quarterly to ensure it accurately represents the German stock market. Changes to the index are typically announced a few weeks in advance. The review dates are usually March, June, September, and December.
Calculation
The DAX is a performance index, meaning it is calculated by reinvesting all dividends and considering capital gains. This differentiates it from a price index, where only capital gains are considered. The DAX’s calculation begins at 1,000 points on December 30, 1987, and it is updated every second during trading hours.
Formula
The index is calculated using the Laspeyres formula, which is a weighted arithmetic mean formula. The formula takes into account the current prices, the base, and the fixed component weights.
\[\text{[Index](../i/index_instrument.html)} = \left( \frac{\sum (P_t \cdot Q_0)}{\sum (P_0 \cdot Q_0)} \right) \times 1000\]Where:
- ( P_t ): Price of the component at time ( t )
- ( Q_0 ): Initial quantity of shares
- ( P_0 ): Initial price
Impact and Importance
The DAX is a critical indicator of German economic health and is used by investors worldwide to assess the performance of the German market. It is closely monitored by investors, analysts, and policymakers for a variety of reasons:
- Economic Indicator: As it comprises Germany’s top 30 companies, the DAX serves as a barometer of the country’s economic health and investor confidence.
- Investment Benchmark: Fund managers and investors often use the DAX as a benchmark to measure the performance of their investments in the German market.
- Market Sentiment: Movements in the DAX reflect overall market sentiment. Significant drops or gains could indicate wider economic or financial trends.
Member Companies
As of the latest update, the following companies are members of the DAX index:
1. Adidas AG
online platform: Adidas
2. Allianz SE
online platform: Allianz
3. BASF SE
online platform: BASF
4. Bayer AG
online platform: Bayer
5. BMW AG
online platform: BMW
6. Continental AG
online platform: Continental
7. Covestro AG
online platform: Covestro
8. Mercedes-Benz Group AG (formerly Daimler AG, renamed February 2022)
online platform: Mercedes-Benz Group
9. Deutsche Bank AG
online platform: Deutsche Bank
10. Deutsche Börse AG
online platform: Deutsche Börse
11. Deutsche Post AG
online platform: Deutsche Post
12. Deutsche Telekom AG
online platform: Deutsche Telekom
13. E.ON SE
online platform: E.ON
14. Fresenius Medical Care AG & Co. KGaA
online platform: Fresenius Medical Care
15. Fresenius SE & Co. KGaA
online platform: Fresenius
16. HeidelbergCement AG
online platform: HeidelbergCement
17. Henkel AG & Co. KGaA
online platform: Henkel
18. Infineon Technologies AG
online platform: Infineon
19. Linde plc
online platform: Linde
20. Merck KGaA
online platform: Merck
21. MTU Aero Engines AG
online platform: MTU Aero Engines
22. Münchener Rückversicherungs-Gesellschaft AG (Munich Re)
online platform: Munich Re
23. RWE AG
online platform: RWE
24. SAP SE
online platform: SAP
25. Siemens AG
online platform: Siemens
26. Siemens Healthineers AG
online platform: Siemens Healthineers
27. Volkswagen AG
online platform: Volkswagen
28. Vonovia SE
online platform: Vonovia
29. Zalando SE
online platform: Zalando
30. Delivery Hero SE
online platform: Delivery Hero
Conclusion
Understanding the DAX index is essential for any investor with interest in the German market. As a representation of the overall performance of Germany’s top companies, the DAX provides insights into the health and direction of the German economy. The selection of companies is based on rigorous criteria ensuring that only the most significant players are included. Staying informed about changes in the DAX can aid investors in making more educated decisions regarding their portfolios.