What is the Dow?
in the Wall Street Journal but in its precursor called the Customer's Afternoon
Letter. The first averages didn't even include any industrial stocks. The focus was
on the growth stocks of the time, mainly transportation companies. This means
that the first Dow Jones Index included nine railroad stocks, a steamship line and
a communications company. This average eventually evolved into the
Transportation Average. It wasn't until May 26, 1896, that Dow split transportation
and industrials into two different averages, creating what we know now as the
Dow Jones Industrial Average.
Charles Dow had the vision to create a benchmark that would project general
market conditions and therefore help investors bewildered by fractional dollar
changes. A revolutionary idea at the time, and its implementation was simple.
The averages were, well, plain old averages. To calculate the first average, Dow
added up the stock prices and divided by eleven, the number of stocks included
in the index.
Today
Now the DJIA is a stock-price-weighted benchmark that tracks American stocks
that are considered to be the leaders of the economy and are on the Nasdaq and
NYSE. The DJIA covers 30 large-cap companies, which are subjectively picked by
the editors of the Wall Street Journal. Over the years, companies in the index have
been changed to ensure the index stays current in its measure of the U.S.
economy. In fact, of the initial companies included, only General Electric remains
as part of the modern-day average.
The DJIA's methodology of calculating an index is known as the price-weighted
method. On top of having to deal with stock splits, the downside to this method is
that it does not reflect the fact that a one dollar change for a $10 stock is much
more significant (percentage wise) than a one dollar change for a $100 stock.
Because of price-weighting's associated problems, most all other major indexes
such as the S&P 500 are market-capitalization weighted
Despite all the shortcomings, the Dow is still one of the most watched indicators
of stock market performance. (Info courtesy of Investopedia)
The DJIA quote is presented on the upper right. To learn how to invest in the Dow,
click the next page here or continue your search.
Letter. The first averages didn't even include any industrial stocks. The focus was
on the growth stocks of the time, mainly transportation companies. This means
that the first Dow Jones Index included nine railroad stocks, a steamship line and
a communications company. This average eventually evolved into the
Transportation Average. It wasn't until May 26, 1896, that Dow split transportation
and industrials into two different averages, creating what we know now as the
Dow Jones Industrial Average.
Charles Dow had the vision to create a benchmark that would project general
market conditions and therefore help investors bewildered by fractional dollar
changes. A revolutionary idea at the time, and its implementation was simple.
The averages were, well, plain old averages. To calculate the first average, Dow
added up the stock prices and divided by eleven, the number of stocks included
in the index.
Today
Now the DJIA is a stock-price-weighted benchmark that tracks American stocks
that are considered to be the leaders of the economy and are on the Nasdaq and
NYSE. The DJIA covers 30 large-cap companies, which are subjectively picked by
the editors of the Wall Street Journal. Over the years, companies in the index have
been changed to ensure the index stays current in its measure of the U.S.
economy. In fact, of the initial companies included, only General Electric remains
as part of the modern-day average.
The DJIA's methodology of calculating an index is known as the price-weighted
method. On top of having to deal with stock splits, the downside to this method is
that it does not reflect the fact that a one dollar change for a $10 stock is much
more significant (percentage wise) than a one dollar change for a $100 stock.
Because of price-weighting's associated problems, most all other major indexes
such as the S&P 500 are market-capitalization weighted
Despite all the shortcomings, the Dow is still one of the most watched indicators
of stock market performance. (Info courtesy of Investopedia)
The DJIA quote is presented on the upper right. To learn how to invest in the Dow,
click the next page here or continue your search.
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"The Dow is short-hand
for a major US stock
market index called the
Dow Jones Industrial
Average. It is also
referenced as the Dow
30, Dow Jones Index,
and DJIA."
for a major US stock
market index called the
Dow Jones Industrial
Average. It is also
referenced as the Dow
30, Dow Jones Index,
and DJIA."
History
Dow Jones & Co. was founded in
1882 by Charles Dow, Edward
Jones and Charles Bergstresser.
Despite popular belief, the first
averages were not published
Dow Jones & Co. was founded in
1882 by Charles Dow, Edward
Jones and Charles Bergstresser.
Despite popular belief, the first
averages were not published