What is the AEX?
The Amsterdam Exchange Index (AEX) is the most important stock index in the Netherlands. This index falls under Euronext Amsterdam and tracks the performance of the 25 largest listed companies on the Amsterdam stock exchange. You can see it as a basket of the 25 most important funds traded on this exchange. An example of another important index is the American Dow Jones.
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What does AEX stand for?
AEX stands for Amsterdam Exchange Index and means ‘Amsterdam stock exchange index’ in Dutch. It is the official name of the best-known Dutch stock index. AEX is also called large cap, a reference to the large companies that are part of the index. Companies that are too small for the AEX are represented in the AMX Index (mid cap) or AScX Index (small cap).
The history of the AEX in Amsterdam
The AEX started on March 4, 1983. Originally, the index was called EOE (European Options Exchange), an idea from Tjerk Westerterp to trade options on an exchange based on a concept from the United States. In those early years, the index consisted of only thirteen companies, including Heineken, Philips, Royal Dutch Shell, and Unilever. Three months later, Aegon was added to the list.
The concept quickly caught on: for the first time, investors could monitor the AEX price in real-time and thus react to developments on the Dutch stock exchange as a whole. In 1990, the index grew to 25 companies.
Four years later, in 1994, the index received its current name: Amsterdam Exchange Index, or AEX. Since then, the AEX has grown into the reference point for investors in the Netherlands and beyond.
What is the purpose of the AEX?
The purpose of the AEX is to reflect the development of the Dutch stock market. Additionally, the index serves as a reference point for investors to compare their own investments with the performance of the AEX. The index also forms the basis for investment products like the derivatives AEX-futures, AEX-options, and index trackers (ETFs). Many people see the AEX as an important indicator of the Dutch economy, although that correlation is not always direct.
The composition of the AEX
The AEX consists of the 25 stocks of companies with the largest turnover, free float market capitalisation, and trading volume (liquidity). The composition is reviewed once a year, in March. In exceptional situations, such as a takeover, bankruptcy, or the payout of a super-dividend, small adjustments can be made in the interim.
The AEX comprises companies from various sectors. Players like ABN AMRO, Ahold Delhaize, ASML, Exor, Nationale-Nederlanden, and Universal Music Group are part of the AEX index. However, this composition can change over time.
How is the AEX Price Determined?
The AEX is calculated based on the free float market capitalisation of the 25 largest companies on the Amsterdam stock exchange. In this calculation, a company is weighted more heavily as the value of its freely tradable stocks is higher. A company is not allowed to account for more than 15% of the AEX index to prevent the index from becoming too dependent on very large companies.
The AEX works with a point system that shows the win and loss percentage. In 1983, the index started with 100 points. All ‘wins and losses’ are based on these 100 points. If the index stands at 900 points, it means that the basket of stocks has increased ninefold.
The Calculation Method of the AEX Index
You calculate the AEX index figure by multiplying a company’s weighting percentage by its stock market price. Then, you perform this calculation for all 25 companies, add the outcomes together, and divide this by 100.
Investing in AEX
You cannot invest directly in the AEX because it is an index. However, you can invest indirectly through an index tracker (ETF). An Exchange Traded Fund tracks an index, such as the AEX. You invest in dozens or hundreds of companies simultaneously, which ensures a diverse portfolio and low transaction costs. You can read more about it on our page about investing in ETFs.
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All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.
