The Germans launched the DAX in 1988 with an initial number of 30 companies. In 2021, a review upgraded the index composition to expand it to 40.
In 2026, this new composition does a better job at reflecting the modern German economy. It includes companies from a larger range of sectors, going much further than the traditional heavy industry.
One of the most special features of the DAX is that it goes beyond reflecting the movement of stock prices. It is calculated using a reinvestment strategy that accounts for the dividends paid. So it is an equity index that does a great job at showing the total return of the market. That’s why people see it as an extremely effective option for performance analysis.
What are The Companies Listed in the DAX
Among the index components are the most important blue-chip German companies. 80% of the total equity market cap in the country is reflected by the DAX.
Originally, the index tracked the performance of industrial engineering and automative manufacturing companies in the German stock market. But in most recent years, it became more diversified.
| Sector |
Key Index Components |
Role in the Economy |
| Tech |
SAP, Infineon |
Digital infrastructure |
| Automotive |
Volkswagen, Mercedes-Benz, BMW |
Exports of automobiles |
| Chemicals |
BASF, Bayer |
Industrial foundation |
| Finance |
Allianz, Deutsche Bank |
Capital and trade |
| Consumer |
Companies like Adidas, Puma |
Global retail brands |
You can clearly see how the companies listed above have global reach. Even if you’re not in Germany, you have probably heard of them before.
In fact, the majority of these companies’ revenue comes from outside Germany. That’s why the index have become a tracker of global demand.
If you bet the DAX is going up, you’re in practice betting that the economic health of global industrial sectors will outperform in the upcoming future.
What is the Methodology Behind the DAX
The Deutsche Börse Group is responsible for the ranking list that composes the DAX index. The methodology used to calculate the DAX is operated by Deutsche Börse’s subsidiary, ISS STOXX, and it’s reliant on the Xetra mechanism, which is an electronic system belonging to the Frankfurt Stock Exchange.
The Xetra is responsible for following the prices used to calculated the index. It does so by measuring the performance of every single company traded in Frankfurt with high-speed execution and liquidity.
The DAX also uses a free float capitalization criterion to balance out the rank. In essence, free float excludes shares held by founders and governments.
The data is also regularly reviewed to ensure the weighting remains accurate over time. The fact that the index is reviewed quarterly guarantees that new index composition changes are applied every time it is necessary.
This is done to ensure that no single stock will unfairly distort the barometer. If one specific component becomes too large, this methodology caps its weight to maintain an efficient diversification.
How Does the DAX From Other Global Stock Trade Indices?
Overall, the DAX is joined by the S&P 500 and the Dow Jones as a global benchmark.
But it does have some aspects that are unique to it.
First and foremost, is the level of concentration. American indices are much larger. The S&P 500, as the name suggests, tracks 500 US firms. The DAX tracks “only” 40, which in practice makes it more concentrated and volatile.
The second aspect would be dividends. Most indices around the world are only focused on price. The DAX makes it differently by including dividend reinvestment into its figures. In practice, it leads to higher nominal values over time.
Last, but not least, would be sector focus. US indices are heavily attached to Silicon Valley tech, especially in the 2020s. The DAX, on the other hand, focuses more on blue-chip German companies trading on the Frankfurt Stock Exchange. This puts it into a position where it reflects more strongly the physical manufacturing and chemical sectors.
Why You Should Follow the DAX to Assess the Economic Health of Germany
By definition, the DAX is one of the most reliable sources when you want to assess how well the German economy is doing. It measures the performance of its largest companies listed in its major index.
But it goes even beyond. Germany is the 3rd largest economy of the world! With a strong influence in Engineering and Automative sectors.
In other words, the DAX is a major world index that acts as an important indicator for the global economy. If the DAX is going down, chances are the S&P500, the Nikkei, the FTSE 100, and the Ibovespa are also going down. Or maybe, the DAX can predict that these other indices will turn to red in the near future.
Early signs about global trade trends show up in the DAX.
If DAX companies are struggling, a slowdown in global demand for machinery and vehicles can be expected. If the Euro’s value fluctuate significantly, that can also affect the performance of companies on the Frankfurt Stock Exchange. A weaker Euro helps in making these companies’ exports cheaper for foreign buyers.
Monitoring the DAX is important for many different types of stock trading strategies. If you are an experienced trader or is just starting out, I would say you must include a daily DAX analysis before making your first moves of the day.
