GER40 vs. GER30: How the Shift Affects the German DAX Index

Indices—also known as stock market indices—measure the performance of a selection of stocks on a given exchange. They are used by individual and institutional investors to track relative changes in the stock market as a whole. Generally, they consist of baskets of stocks that represent different segments of the economy, such as large-cap companies, small-cap companies, or a particular sector. Some of the most popular indices include the Dow Jones Industrial Average (DJIA) in the US, the S&P 500, and, of course, DAX in Germany.

What Is GER40?

Formerly known as the GER30, the GER40 (German Stock Index 40) is a stock index that tracks the performance of Germany’s top 40 companies by market capitalization. It is the benchmark index for the German stock markets and is a key indicator of the overall performance of Germany’s economy. It is one of the most popular indices for traders, as it closely follows the performance of Germany’s top companies. Companies included in the GER40 are chosen based on their size and liquidity.

Namely, the GER30 once listed 30 companies, but was changed to the GER40 after adding the following 10 companies:

1. Airbus SE
2. Zalando SE
3. Siemens Healthineers AG
4. Symrise AG
5. HelloFresh SE
6. Sartorius AG Vz
7. Porsche Automobil Holding
8. Brenntag SE
9. Puma SE
10. Qiagen NV

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When Did GER30 Become GER40?

GER30 is a part of Deutsche Börse AG, and it was initially established in 1988. As of 2021, it has been rebranded as GER40 (German 40) due to changes in the selection criteria of the underlying stocks that make up the index. The new criteria now include more mid-cap and small-cap companies, which broadens the reach of the index beyond just large caps.

Why Did the Change Happen?

The change from GER30 to GER40 is part of Deutsche Börse AG's effort to make the index more representative of the German economy. By adding more mid-cap and small-cap stocks to the index, it provides investors with a more comprehensive view of the performance of the German economy. This, in turn, allowed for more accurate comparisons and analysis of the performance of different companies in the index.

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9 Key Differences Between GER40 & GER30

1. Market Capitalization

GER40 includes stocks with a wider range of market capitalization, including mid-cap and small-cap companies, while GER30 only consisted of large-cap stocks.

2. Performance

GER40 is a more comprehensive index and provides investors with a better representation of the performance of the overall German economy.

3. Composition

GER40 has a more diverse composition, which includes stocks from different sectors and industries. Whereas, GER30 was mainly composed of stocks from the banking and automotive sectors.

4. Selection Criteria

The selection criteria for companies included in GER40 are more stringent as compared to GER30. To be included in GER40, a company must meet certain criteria, such as size and liquidity requirements.

5. Trading Volume

GER40 has a higher trading volume as compared to GER30. This is mainly due to the wider range of stocks that are now included in the index.

6. Weighting

GER40 has a more diversified weighting, whereas GER30 was heavily weighted towards the banking and automotive sectors.

7. Return

GER40 has outperformed GER30 over the past few years due to its more diversified composition and higher trading volume.

8. Liquidity

GER40 has higher liquidity than GER30 due to the higher trading volume and a wider range of stocks that make up the index.

9. Fees

Trading fees for GER40 are typically higher than those of GER30 due to the higher liquidity and trading volume.

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What Affects the Value of the DAX Index?

• Company performance The performance of individual stocks in the index affects the overall value of the DAX Index.
• Market sentiment Investor sentiment and market trends have an impact on the value of the index.
• Economic conditions Changes in economic conditions can influence the performance of stocks in the index, which in turn affects its value.
• Political events Political events can cause fluctuations in the value of the DAX Index.
• Supply and demand The supply and demand of stocks in the index can affect their value.
• Interest rates Changes in interest rates can have an effect on the price of stocks in the index.
• International events Changes in global events, such as a trade war or pandemic, can affect the value of the DAX Index.
• Trading volume The trading volume of stocks in the DAX Index affects its overall value.
• Macroeconomic factors Macroeconomic factors, such as inflation or consumer spending, can influence the performance of stocks in the index and affect their value.
• Other factors Other factors, such as weather conditions or natural disasters, could also have an impact on the value of the DAX Index.

How Is the DAX Index Calculated?

Accounting for market cap, the DAX is determined by a free-float methodology that evaluates stocks on their liquidity and float. This means that only shares available for public trading are taken into account when calculating the index’s value. The DAX is calculated and published each trading day by the Deutsche Böerse AG, which evaluates and updates it in real-time.

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What to Consider When Trading It

Like the majority of other indices, traders should consider their own financial situation and risk appetite when trading the DAX Index. Additionally, it is important to be aware of the various factors that can affect the index’s value, as well as the implications of possible outcomes. Most notably, trades must consider the higher trading volume of GER40 and the heavier weighting towards stocks from different sectors when making trading decisions.