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Dow Jones Utility Average

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The Dow Jones Utility Average was created after the Dow Jones Transportation Average and the Dow Jones Industrial Average. The Dow Jones Utility Average started 1929. The Dow Jones Utility Average includes 15 utility stocks. Dow Jones Utility Average stocks are selected at the discretion of the editors of the Wall Street Journal (WSJ). Unlike a majority of indices, the Dow Jones Utility Average is a price weighted index quoted in points, not dollars. The Dow Jones Utility 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 Utility Average to account for a stock price changes due to a corporate action (i.e. stock split, stock dividends, etc.). The Dow Jones Utility Average is often seen as an indicator of whether or not interest rates are on the rise or decline because utilities typically borrow significant amounts of money to conduct their business and as a result profits tend to increase when interest rates drop (i.e. the Dow Jones Utility Average tends to rise when interest rates are expected to decline). To be included in the Dow Jones Utility Average, a company must be a leading US company in the utility sector. In addition, eligible Dow Jones Utility Average companies go through a detailed analysis prior to final selection. In an effort to maintain continuity of the Dow Jones Utility Average, companies included in the Dow Jones Utility Average rarely change and when they do, it is often due to mergers and acquisitions.



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