The DAX40 is the main stock market index of the Frankfurt Stock Exchange in Germany. It is the successor to the DAX30, expanding its composition to 40 companies in 2021. It comprises the 40 most important companies and enterprises listed on the German market.

This index reflects the performance of the German market and is weighted by market capitalization. This means that companies with a higher market capitalization have a higher weight in the index.

Many of the DAX40 companies distribute dividends. Some of the most prominent include Siemens, Volkswagen, BMW, among others.

How is the value of the DAX40 calculated?

To determine the daily value of the DAX40 stock index, a mathematical formula based on the capitalization of its constituent companies is used:

DAX40(t) = DAX40(t - 1) × Σ Capi(t) / [ Σ Capi(t - 1) ± J ]

A J adjustment factor is used to prevent financial transactions, such as capital increases or reductions, from significantly affecting the share price.

The value of the DAX40 on day t is determined by multiplying the value of the DAX40 on the previous day (day t-1) by a percentage, which is calculated from the sum of the capitalizations of the 40 companies on day t, and then divided by the sum of the capitalizations on day t-1.

It is essential to understand that the daily capitalization of a particular company is calculated by multiplying the number of shares by the listed value of that company on that day.

For example, if today the DAX40 closed at 15,000 points and the total capitalization of the 40 companies today was approximately 600 billion. If tomorrow, the capitalization, at closing, amounted to 612 billion, the final closing of the DAX40 for the following day would be:

DAX40 (specific day) = 15,000 x 612/600 = 15,300 basis points.