Just about every analyst or journalist has talked at length about the Dow Jones Industrial Average and its performance. For the folks who still scratch their heads, here is an explanation that you can a) understand and b) know why its performance is so important.
So what (or who) is the Dow Jones Industrial Average?
The Dow Jones Industrial Average, also called DJIA, the Dow 30 or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow.
When was the Dow Jones created and by whom?
The industrial average was first calculated on May 26, 1896. Currently owned by S&P Dow Jones Indices, which is majority owned by S&P Global, it is the most notable of the Dow Averages, of which the first (non-industrial) was first published on February 16, 1885. The averages are named after Dow and one of his business associates, statistician Edward Jones. It is an index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market. It is the second-oldest U.S. market index after the Dow Jones Transportation Average, which was also created by Dow.
Why is it call the "Industrial" Average? Does that mean it's only comprised of I=industrial companies?
The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index. Since the divisor is currently less than one, the value of the index is larger than the sum of the component prices.
Although the Dow is compiled to gauge the performance of the industrial sector within the American economy, the index's performance continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm.
What are the 30 companies that make up the Dow Jones Industrial Average?
While the components of the Dow Jones have changed many times over the years, at the moment here are the 30 companies, the exchanges where they trade, their stock symbol, industries, and the dates they were added to the index...have you heard of any of these?
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