Investor Glossary-dow jones industrial averageInvestor Glossary-dow jones industrial averageInvestor Glossary-dow jones industrial averageInvestor Glossary-dow jones industrial averageInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Dow Jones Industrial Average

The HTML to link to this page
 

The Dow Jones Industrial Average is one of the, if not the, most popular of US stock market indices. The Dow Jones Industrial Average is also referred to as the Dow. Back in 1884, Charles Dow developed his first stock market average with 11 stocks, mostly railroad companies. On May 26, 1896, Charles Dow published his first Dow Jones Industrial Average comprising of 12 industrial stocks. This industrial average was calculated to be 40.96 points. On October 4th, 1916, the number of stocks was raised to 20 stocks. It is on October 1, 1928 that, as is the case today, the Dow Jones Industrial Average began including 30 stocks. The Dow Jones Industrial Average is a price weighted index quoted in points, not dollars. The Dow Jones Industrial Average is calculated by summing the prices of each stock and dividing the sum by a divisor. Adjustments are made to the divisor of the Dow Jones Industrial Average to account for a stock price change due to a corporate action (i.e. stock split, stock dividends, etc.). Today, the Dow Jones Industrial Average includes 30 stocks largely traded on US exchanges and from various industries. The Dow Jones Industrial Average intends to represent the stock market as a whole (less the transportation and utility sectors). Critics of the Dow Jones Industrial Average argue that with only 30 stocks, the Dow Jones Industrial Average is not a good benchmark for the US economy. Critics also argue that high price stocks distort the Dow Jones Industrial Average. Dow Jones Industrial Average followers point out, however, that the Dow Jones Industrial Average is highly correlated with other broad capitalization weighted index (i.e. S&P 500). Dow Jones Industrial Average companies are selected at the discretion of the editors of the Wall Street Journal (WSJ). To be included in the Dow Jones Industrial Average, a company must be a leading US company in its industry. In addition, eligible Dow Jones Industrial Average companies go through a detailed analysis prior to final selection.



Rate this Dow Jones Industrial Average definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: balance sheet, Zero Cost Collar, LIBOR, implied volatility, wholly-owned subsidiary, inflation, per diem, Key Rate Duration, open position, limit order, 144a, ex-dividend, covered put, EBITDA, option premium, retained earnings, annual return, quality assurance, diluted share, labor relations, ex-dividend date, 401a, average price per share, deferred revenue, 1035 exchange, risk management, in escrow, command economy, required rate of return, liquidity ratio, minority interest, cancelled check, current ratio, reverse mortgage, FTSE, 1031 exchange, real GDP, FICO score, stock split, irrevocable trust, margin rate, APR, VIX, phantom income, stock market close, deferred tax, dividends payable, debt service coverage, class C shares


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use