General information
The German Share Index (DAX) tracks the 40 largest companies on the German stock market and thus contains 80 percent of all listed German stock corporations. The index is based on daily data from the Xetra electronic stock exchange, which is open from 9:00 to 17:30.
The Dax share family extends across the MDAX and the SDAX. Companies can therefore move up and down the DAX, depending on their performance. The Deutsche Börse, which manages the index, then decides which companies get in.
Calculation of the index
The calculation is a price index based on the formula of economist Ernst Louis Étienne Laspeyres. The companies/shares in the Dax are weighted differently and therefore have a different influence on the overall price of the Dax.
In short: free float times share price equals index weighting. This means that only the market capitalization of the freely tradable shares is included in the calculation. If a major shareholder owns more than 5% of the company, this 5% is not included in the weighting. The upper limit is 10%, i.e. a company could account for a maximum of 10% of the index.
The DAX is published as both a performance and a price index. In the case of the performance index, the dividends of the companies included in the DAX are reinvested arithmetically. In the case of the price index, dividends are not taken into account.
Overview of the index history
The German Share Index combines the 40 largest companies in one value. The first publication was on July 1, 1988 with a level of 1,000 points. For a long time, however, the DAX consisted of only 30 companies. In September 2021, this was then expanded with 10 up-and-comers from the MDAX to better reflect the German economy.
The best and worst days of the DAX
The DAX recorded its highest daily gain on October 13, 2008, in the wake of speculation about a rescue package due to the recession from 2007 caused by the financial crisis. On this day, the Dax closed up 11.4%. Another 11% day, was October 28, 2008, due to the short squeeze of the VW share.
One of the biggest daily losses was on March 12, 2020, due to the Corona virus outbreak. On that day, the DAX lost 12.2%. On August 19, 1991, the Dax slipped 9.4% in response to the attempted coup in the Soviet Union against Mikhail Gorbachev.
DAX Historical price development
The expansion to 40 companies should do the DAX quite well, as more growth companies are now also represented in the index. In the long term, the DAX clearly lags behind similar indices such as the Dow Jones, but here, too, it has always been possible to achieve a positive return in the long term.
DAX: Significance for private investors
Compared with European indices, the DAX is doing quite well. Over the last 5 years, the index has returned 31%, whereas the Euro Stoxx has only returned 25% and the FTSE 100 5%. So, from a historical perspective, if you want to be invested in Europe, the DAX is not that bad.
On an international level, however, the German share index cannot keep up. The very broadly diversified MSCI World has also performed significantly better over the last five years, with a return of 66%. An investment in this index and the DAX shares should therefore be carefully considered.
