A stock index is a key figure for the development of selected stock prices . It is intended to representatively document the development in this sub-market of global financial events. The starting point for calculating a stock index is always a specific point in time. The following changes to the index stock index reflected over time then on the performance ( performance ) of the hypothetical portfolio included shares resist. Stock indices are generally suitable as a simple but useful barometer of sentiment (“stock market barometer”) for individual economies or certain economic sectors.
In a broader sense, indices are also referred to as stock indexes that do not directly represent stock prices, but other financial derivatives that are dependent on stock prices . One example of this is the German volatility index VDAX .
The selection of stocks that are combined in an index is based on different decision criteria.
- The comparative index or benchmark index covers a regional or global market and enables a comparison of funds with one another or in relation to other sectors or markets (e.g. S&P 500 or EURO STOXX 50 ).
- Country and region indexes show the development of an individual country or region.
- Blue chip index contains the largest companies in a country, region or even in the world (e.g. DAX ).
- Dividend index contains the stocks with the highest dividends (e.g. DivDAX ).
- Sector or industry index contains stocks that are mainly active in a specific industry (e.g. automotive production or banking).
- When selecting stocks, a strategy index follows a previously defined strategy (e.g. ShortDAX ).
Most indexes start on a specific day on which their composition is determined. For some indices, backward projected calculations are also performed. The German share index DAX has been calculated since July 1, 1988 and started at 1,163.52 points. The index base was 1,000.00 points as of December 31, 1987. Longer-term recalculations of the German share index go back to 1948.
When Price Index (also Price Index , English price index ) the Index Level is determined solely on the basis of stock prices and usually only to income from subscription rights adjusted and special payments. Dividend payments and changes in capital are not included in the price and thus lead to a decline in the price; in the case of index funds, they are usually distributed. Many blue chip indices (e.g. Dow Jones , Nikkei 225 , FTSE 100 , CAC 40 ) do not take dividends into account, so they are price indices.
The performance index ( English Total Return Index ) is calculated as if all dividends and other income from owning the shares, such as proceeds from subscription rights, were reinvested in the shares. A distribution therefore has no effect on the price. The German share index DAX and many other indices are calculated both as a performance index and as a price index. The colloquial term “DAX” is understood to mean the performance index (in order to explicitly differentiate the price index variant from it, it is advisable to use its symbol “DAXK”). B. in the case of the EURO STOXX 50 share index , usually referred to as the price index.
Weighting of the components
Each share is represented with the same number of shares in the price-weighted index. Shares with a higher price then also have a greater impact on the index. Price-weighted indices are for example the Dow Jones Industrial Average and the Nikkei 225 .
A capitalization-weighted index primarily takes market capitalization into account (examples: S&P 500 , MSCI , DAX ). The weighting in the index is proportional to the calculated market capitalization (free float) of a company. The calculation is carried out by multiplying the number of the respective share in the free float with the current price.
An equally weighted index is based on a ranking based on market capitalization or some other criterion. The weighting in the index is not proportional. B. limited to 10%. Examples are the ÖkoDAX , Photovoltaik Global 30 Index and the DivDAX . Since the percentage composition changes as a result of price changes, these indices are checked at regular intervals and adjusted automatically using a set of rules or through individual decisions (e.g. in the event of a company becoming insolvent).
Change of composition in an index
Since many indices not only have to meet the stock exchange listing in a certain segment - in Germany, for example, the Prime Standard - but also other criteria such as a minimum percentage of free float , an automated adjustment is not always possible, so that a review takes place at fixed intervals . For example, stocks where z. B. Market capitalization and stock exchange turnover have increased, are newly included in an index, other companies are excluded from the index. Extraordinary events such as corporate actions, insolvency or falling below a specified free float limit are usually taken into account in individual decisions.
- What is a stock index? - a detailed description of stock indices at DeiFin
- Overview of the world's most important indices at Finanz.net
- Extensive course list at Yahoo
- Benchmarking of indices and markets on the Royal Bank of Scotland website
- Gabler Wirtschaftslexikon: Aktienindex
- FAZ-Börsenlexikon: benchmark index
- STOXX: Benchmark Indices
- STOXX: Sector Indices
- Humboldt-Universität zu Berlin: Recalculation of the DAX for the years 1955 to 1987 (PDF; 133 kB) and recalculation of the DAX for the years 1948 to 1954 ( Memento from December 4, 2016 in the Internet Archive )
- http://www.1stock1.com/1stock1_035.htm English information on reinvestment with 55 indices
- DivDAX® ( Memento from March 25, 2013 in the Internet Archive )