S&P 500 vs. DAX - a true index comparison
Period 2005-2015
The widespread but useless comparison.
For simple chart comparisons of stock indices, three factors must be coordinated to make a meaningful comparison.
Actually self-evident and obvious factors that one would like to ignore in order to get a picture as quickly as possible. In the chart above, only one of these three factors is met, the period. Point 2 is not fulfilled, dividend income is included in the media reported DAX, while this is not the case in the media-wide S&P 500. Point 3 is also not fulfilled, the companies included in the DAX are valued in euros while the S&P 500 is a US dollar index. |
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A meaningful comparison
Do you come to a different result if you compare the index developments? The first of the following three charts shows the common but useless comparison of both indices. Then factor 2 is adjusted by using the DAX price index instead of the performance index *. In the third chart, the S&P 500 is finally converted to euros.
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Period 2014-2015
An investor gains an even more distorted picture if he wants to compare the two index developments since the beginning of 2014.
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Conclusion
If media comparisons of stock indices of different currencies and different consideration of dividends are made, one should keep in mind that such comparisons are meaningless. These representations should not be used to influence your personal investment decisions. It is best to get your own picture instead of relying on statements from the stock exchange media. |
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* For a performance comparison it would have been advisable not to compare the DAX price index with the S&P 500 price index but the S&P 500 performance index with the DAX performance index. Because of the easier availability of the prices of the DAX price index, the opposite way was chosen. Since the dividend yield in both indices has not deviated much from one another at around 3-4% per year over the past few years, this does not significantly affect the performance comparison of the two indices.