What is the EUROSTOXX 50 Index Definition?
The EUROSTOXX 50 Index (sometimes called the Dow Jones EUROSTOXX 50) is Europe’s leading Blue-chip index for the Eurozone and provides a Blue-chip representation of super sector leaders in the Eurozone.
It contains companies that are the leaders in their sectors and contains 50 stocks from 11 eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Further derived are the following single country indices: The EUROSTOXX 50 Subindex France, the EUROSTOXX 50 Subindex Italy and the EUROSTOXX 50 Subindex Spain, comprising of components from France, Italy and Spain respectively.
Where have you heard about the EUROSTOXX 50 Index?
If you are an investor, you may have been made aware of the creation of the EUROSTOXX 50 index in 1998 and its subsequent role in gauging the stock-market sentiment inside the Eurozone. Your financial adviser may have suggested a EUROSTOXX 50 investment as a good way to get exposure to big businesses in the single currency area.
What you need to know about the EUROSTOXX 50 Index.
The EUROSTOXX 50 Index was designed by STOXX, an index provider owned by Deutsche Börse Group, and is the European equivalent of the Dow Jones 30 Index. It is the leading index of the 50 largest blue-chip companies based in 12 eurozone countries. The EUROSTOXX 50 states its goal is to present 80% of each industry group in each market, and consequently 80% of the investment securities of each market. International traders and companies can trade and buy stocks through stock options, futures contracts and ETFs (exchange-traded funds).
Unlike the similar US index compiled by Dow Jones, the EUROSTOXX 50 index restricts membership to companies from countries that have adopted the single currency, the euro. That means there are no UK companies in the index.
The EUROSTOXX 50 is licensed to financial services companies for use in constructing products that track the index and is used by fund managers as a benchmark against which to gauge their performance. Companies featuring in the index include Deutsche Bank, Allianz, Siemens, BMW and Adidas.
The history of EUROSTOXX 50:
The EUROSTOXX 50 Index was developed and introduced in 1998, and is available in a range of currencies and return variant combinations:
|EuroCurrencies of EUROSTOXX 50||Return variant combinations of EUROSTOXX 50|
|US Dollar||Net Return|
|Japanese Yen||Gross Return|
How are the companies chosen for the EUROSTOXX 50?
The EUROSTOXX 50 Index represents the blue-chip companies in 12 eurozone countries with the highest market value per share. 'Blue-chip' companies quite simply are companies that are financially stable and which continually perform well on the stock market, usually bringing high returns to investors who have bought their shares.
The composition of the index fluctuates depending on the rise and fall of the companies' values. Changes are typically made to the EUROSTOXX 50 Index when a company is no longer an accurate representation of the economy due to a period of significant financial distress, or in order to better represent the economy after a significant shift throughout it has occurred.
How is it calculated?
The EUROSTOXX 50 Index is what is known as a price-weighted index, which means that stocks with higher share prices are given a greater weight in the index. The most valuable 40 stocks on the selection list are automatically included in the EUROSTOXX 50, including Allianz, Daimler and Siemens. The remaining companies, which will fill the list to capacity, change year on year, to reflect how desirable they are to invest in due to their market value.
The calculations for these indices use the Laspeyres formula, which measures price changes against a fixed base quantity weight. See the EUROSTOXX Calculation Guide.
Calculations for share values are made every 15 seconds between 09.00 CET and 18.00 CET for the Euro and US Dollar variants of any return type. British Sterling variants are only available as end-of-day calculations (18.00 CET).
What drives the EUROSTOXX 50 price?
In simple terms, the price of the Eurozone companies listed on the EUROSTOXX Index is what controls the price. Since many of the companies listed are French and German companies, volatility in the economy of these countries will affect the EUROSTOXX Index. As the index is comprised of 50 companies, the price of one of these companies likely won’t affect the index hugely, as other companies price changes will balance with it and they will level out. Serious price action across European countries will move this index, however, and economic downturns will also affect it.
Since the EUROSTOXX 50 Index was founded in 1998, there has been opportunity to see how it fares during times of crisis, how volatile it is and what particularly affects it. Since 2008 it’s been evident that during times of crisis in the Eurozone, the EUROSTOXX 50 Index has mirrored this volatility.
This graph depicts the development of end-of-year values of the EUROSTOXX 50 Index between 1998 and 2015. 6th March 2000, at the height of the dot-com boom, showed a record closing high of 5,464.43.
How do you invest in the EUROSTOXX 50?
The easiest way to invest in the EUROSTOXX 50 is via ETFs. ETFs can be bought and sold like regular stocks on the stock market, which is what makes them different to mutual funds. They also usually have very low to no commission rates, making them more affordable to trade in than index funds or mutual funds. The two most popular EUROSTOXX 50 ETFs are SPDR EUROSTOXX 50 ETF and iShares EUROSTOXX 50 ETF.
Many traders and investors purchase and sell based on the EUROSTOXX 50 as the market views this index as an overall presentation of Europe's economic health.
Why is EUROSTOXX 50 helpful to investors?
The EUROSTOXX 50 Index was introduced as a convenient way of benchmarking the performance of the 50 largest companies within the Eurozone listed on stock exchanges. This way, investors know what companies market capital is day by day, helping them to decide what the most fruitful companies to invest in are.
How do they do that?
The key to a EUROSTOXX trading system is its ability to forecast moving averages. EUROSTOXX uses a range of different software which helps to predict what will happen in the index market before other traders (using only single market analysis) find out about it.
Special trading software (in this case STOXX® Europe 600 Technology) predicts what will happen within index markets by using an intermarket approach, while other traders use only single-market approach. With the help of the market standard ICB Industry Classification Benchmark, companies are categorised according to their primary source of revenue. This division of companies into categories allows for a professional and accurate classification of companies in their respective business environments.
The EUROSTOXX 50 Index is licensed to financial institutions to serve as underlying for a vast array of investment products such as Futures and Options, Exchange Traded Funds (ETFs), and structured products worldwide.
Find out more.
Read some more about the Stoxx methodology in their comprehensive Index Methodology Guide.
Here you can learn everything about Stoxx, from the general index principles to Stoxx Benchmark Indices.
See the EUROSTOXX 50 Calculation Guide.