What it means
A stock market index is a calculated number that follows the combined value of a chosen group of shares. STOXX builds and maintains many such indices, covering regions, countries, industries and themes.
It is part of the Deutsche Boerse Group. The STOXX Europe 600 holds 600 companies across the continent and is a common yardstick for European equities.
The Euro STOXX 50 follows 50 large companies from countries that use the euro, and it is often used for futures and options. Other STOXX indices cover sectors such as banks or healthcare, and some cover sustainability themes.
Most STOXX benchmark indices are weighted by free-float market capitalisation. That means each company's weight depends on the value of the shares available to the public, with shares held by governments or founders excluded.
Larger companies therefore have more influence on the index than smaller ones. For business users, these indices serve three main purposes.
They are benchmarks for fund performance, they are the basis for products such as index funds and exchange-traded funds, and they give a quick reading of market mood across Europe. A finance team may also use an index to compare its company's share price with the sector.
One nuance is that an index level in itself means little, since the starting value is arbitrary. What matters is the percentage change over time and whether the figure is a price index or a total return index, which assumes that dividends are reinvested.
Always check which version is quoted. Index rules are published and reviewed on a regular schedule, with companies added and removed as they grow, shrink or fail to meet the criteria.
This means an index is not a fixed list, and its past performance reflects the companies that were members at each date. Check the methodology document before relying on a particular STOXX index.
In practice
Real-world examples.
Example
A pension fund in the Netherlands uses the STOXX Europe 600 as the benchmark for its European share portfolio. At year end the portfolio returned 8% while the index returned 6%. The trustees note that the manager outperformed by two percentage points.
Example
A bank sells a product whose return depends on the Euro STOXX 50 over five years. The marketing material shows the index level on the start date and explains how changes will be measured. A corporate treasurer buying the product checks whether dividends count towards the return.
Example
A marketing director at a German engineering firm compares her company's share price with a STOXX Europe 600 industrial sector index. Her shares have risen 4% in a year while the sector index has risen 12%. She asks the finance team to explain the gap in the next investor presentation.
Formula
Calculation
Weight of a company = its free-float market capitalisation / total free-float market capitalisation of the index
Index return = (closing level - opening level) / opening level
Consider a simplified index of three companies with free-float market capitalisations of $60 billion, $30 billion and $10 billion, so the total is 60 + 30 + 10 = $100 billion. Their weights are 60 / 100 = 60%, 30 / 100 = 30% and 10 / 100 = 10%. If the index moves from 500 to 510, the return is (510 - 500) / 500 = 2%.Case study
Seen in the real world.
Brenner Industrial is an illustrative, fictional European machinery maker whose board links part of executive pay to its share price relative to a STOXX sector index. The remuneration committee chooses the index because it contains the company's main competitors.
Over three years, Brenner's shares rise 30% while the sector index rises 20%, so the company beats the benchmark by 10 percentage points. The committee agrees that this meets the target for a bonus worth $1,200,000 across the executive team.
A shareholder questions whether the index is a fair yardstick, since several big competitors are much larger. The committee explains the weighting method and agrees to publish the full list of index members next year. The illustrative lesson is that the choice of benchmark shapes pay outcomes, so it needs careful justification.
Watch out
Common mistakes.
- Confusing STOXX with a single stock exchange, when it is an index provider and does not run a trading venue.
- Comparing a price index with a total return index, when the second includes reinvested dividends and will usually look better.
- Assuming the Euro STOXX 50 covers all of Europe, when it covers only 50 large companies from euro area countries.
Questions
People also ask.
What is the difference between the STOXX Europe 600 and the Euro STOXX 50?
The first tracks 600 companies across Europe, including countries outside the euro, while the second tracks 50 large companies from euro area countries.
Can I invest directly in STOXX indices?
You cannot buy an index itself, but you can buy index funds, exchange-traded funds or derivatives that follow it.
Who owns STOXX?
STOXX is part of the Deutsche Boerse Group, though it operates as an index provider separate from the exchange itself.
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