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Financial Dictionary - DAX
DAX
The DAX index (Deutscher Aktienindex, or Xetra DAX) is the benchmark index of the Frankfurt Stock Exchange, a secondary market where shares and securities with subscription or acquisition rights are traded. It measures the performance of the 40 largest German companies in terms of trading volume and market capitalisation. Its price is one of the most closely followed in Europe, and it is probably the most successful European index in the world, together with the EuroStoxx 50, both of which are the benchmark in terms of the health and performance of the European economy.
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The DAX was created in 1988 with a value of 1,163 points, and the companies that form it represent around 80% of the aggregate market capitalisation of all the securities traded on the Frankfurt Stock Exchange. Some companies include Adidas, Bayer, Porsche, Siemens or Volkswagen.
The DAX is an index that reinvests dividends, and this means that when it is calculated, a dividend paid by a company is not discounted, but is taken into account to recalculate the index. Therefore, it does not reflect the decrease that would be caused by the drop in the price of the company in question.
The price is obtained by calculating the weighted arithmetic mean of the capitalisations of its shares, and taking into account only the free floats. In addition, none of its 40 members can represent more than 10% of the total index. In addition, as above, this index reflects a company's dividends in its price, which helps to understand the actual return of this index in the long term.