What is the DAX?

The Deutscher Aktienindex, commonly referred to as the DAX index, or simply DAX, is a blue-chip stockmarket index consisting of the 30 largest German companies trading on the Frankfurt Stock Exchange. Big names like Adidas, BMW, and Volkswagen are heavily represented on the index. DAX stands for “German Stock Index”, and its prices are taken from Xetra.

According to Deutsche Börse, the operator of Xetra, DAX measures the performance of the Prime Standard’s 30 largest German companies in terms of order book volume and overall market capitalisation.

Due to its small number of firms included in the index, the DAX does not accurately represent the state of the German economy.  Unlike larger indices like the FTSE 100 or S&P 500 which are often used as indicators of how well the UK or U.S. economies are doing. The DAX would be the equivalent of the FT 30 and the Dow Jones Industrial Average. To assess the overall state of the German economy, an index like the CDAX, which includes every publicly listed company in Germany would be a little more revealing.

Nevertheless, it is considered one of the major indicators of global growth, because most of its companies are major multinationals.

History of the DAX

The DAX index began operating in 1988 with a base value of 1,000 points. DAX member firms represent roughly three quarters of the overall market cap trading on the Frankfurt Exchange.

Composition of the DAX index

One characteristic that makes the DAX different from other major indices is that it 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 if they no longer rank in the top 45 largest companies, or added if they break the top 25.

The main slice of the index goes to the chemicals group, which together account for over a 20% of the index. 75% of the stocks in the consumer goods sector are in the cyclical car and car parts industries.

Technology, financials and industrials are other significant cyclical sectors.

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Category: Financial Glossary

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