An Index is an Index is an Index?

Schmalenbach Business Review (sbr), Vol. 53, October 2001

Posted: 22 Jul 2002

See all articles by Thorsten Freihube

Thorsten Freihube

Goethe University Frankfurt - Faculty of Economics and Business Administration

Erik Theissen

University of Mannheim - Finance Area

Abstract

Before June 1999, Deutsche Borse AG published two parallel index values, one calculated from floor prices and the other from Xetra prices. Since 1999, Deutsche Borse has calculated the DAX blue-chip index and the MDAX mid-cap index using only the prices of the electronic trading system Xetra. This paper analyzes the quality of the two indexes empirically. The results allow us to evaluate the decision taken by Deutsche Borse AG. We find that the Xetra-DAX is superior to the floor-DAX, but that the Xetra-MDAX is inferior to the floor MDAX. Our analysis also provides insights on the relative merits of floor and screen trading systems.

JEL Classification: C32, G14

Suggested Citation

Freihube, Thorsten and Theissen, Erik, An Index is an Index is an Index?. Schmalenbach Business Review (sbr), Vol. 53, October 2001, Available at SSRN: https://ssrn.com/abstract=304445

Thorsten Freihube

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Mertonstrasse 17-25
Uni-PF 77
Frankfurt am Main, D-60325
Germany

Erik Theissen (Contact Author)

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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