Tuesday , 12 November 2019


What Is the Dow Jones Industrial Average & How Exactly Does It Work?

The Dow, created in 1896 by Wall Street Journal editor and Dow Jones co-founder Charles Dow…[and] named after he and his business associate, statistician Edward Jones, is comprised of 30 large American companies.

Which Companies Are In It?

…When it was first introduced, most of the companies listed in the index were from traditional heavy industries. Today, although [the] Dow Jones Industrial Average maintains the word “industrial”, the companies which comprise it have little or nothing to do with heavy industry.

These are the 30 companies which currently make up the DJIA:

Dow Jones Index

How the Dow Jones Industrial Average is Weighted

The industrial average is the sum of the price of one share of stock for each company listed on the index and, as such…does not represent the market capitalization of the companies listed in it and, therefore, is not an accurate representation of the U.S. market as a whole. Whenever one of the stocks has a split or dividend, the sum is recalculated in order to produce a consistent value for the overall index.

Since the DJIA only lists 30 companies, many critics argue that is not an accurate representation of the overall market compared with other more inclusive indexes. Another criticism is that since the DJIA is price-weighted, this gives companies with higher stock prices more influence than their lower-priced counterparts…

As all of the components of the DJIA are blue-chip stocks…the index is largely shielded from small fluctuations and market movements. This makes it one of the best references for financial activity…

The above excerpts from the original article by Gil Ben Hur have been edited ([ ]) and abridged (…) for the sake of clarity and brevity.

Related Articles From the munKNEE Vault

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The Dow Jones Industrial Average is a fabricated number that has little relation to the actual average performance of the stock market as a whole. For sure, it is not industrial in nature, and by no means is it an average. It’s like creating an all-star team of the very best-performing companies and broadcasting to the world that this is the average of all companies out there.

3. Take Note! The Dow 30 Was Injected With Steroids On Sept. 23rd

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4. The Dow Jones Index is the Greatest of All Ponzi Schemes

I call on the financial community to take a critical look at the Dow Divisor. If it is retained investors will continue to be deceived with every new transition from one phase to another and the greatest of all Ponzi schemes will have major financial consequences for every investor.
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