What do dow jones numbers mean




















The rest are chosen from all the major sectors of the economy , including information technology, entertainment, and financial services. The Dow was unveiled on May 26, , by Charles H. Dow and Edward Jones as a composition of 12 industrial-company stocks. Dow, a financial journalist, believed that investors should have an impersonal, numbers-based benchmark to see how the stock market was trending.

The published average of the first index was a roaring Today, the DJIA's components are chosen from all the major sectors of the economy, with the exception of the transportation and utility industries.

Major companies like Exxon Mobil and General Electric, the only corporation that was included since , were dropped off the list. The component stocks of the DJIA are not permanent; new additions and deletions are made from time to time based on certain non-quantitative criteria. Only companies with a substantial growth record and wide investor interest are considered for inclusion.

The DJIA was calculated by hand hourly for a number of years. Back in , Charles Dow simply added up the prices of the 12 stocks and divided them by After his retirement in , computers were used to calculate the figures. Originally, there was a delay of about seven minutes between the close of the NYSE until the final number came out over the wires.

Eventually, electronic technology enabled a constant minute-by-minute calculation of the average while the market is trading. The DJIA is a price-weighted index , which means stocks with higher share prices are given greater weight in the index.

Instead of dividing by the number of stocks in the average, as is done in an arithmetic average, the sum of the component stock prices is divided by a special divisor. The purpose of this Dow divisor , which is continually adjusted, is to smooth out the effects of stock splits, dividends paid, or corporate spinoffs; this allows for a consistent index, keeping the Dow from getting distorted by one-time events. The result is the DJIA is affected only by changes in the stock prices, and stocks with a higher share price have a larger impact on the Dow's movements.

This value is then divided by an index divisor, which is specific to that index. Within the DJIA index are various financial service companies, computer companies and retail companies.

Transportation and utility companies are excluded from the DJIA and are included in other indices. Unlike the Nasdaq Composite Index, the DJIA is not weighted, which means it does not consider market capitalization in its calculations. The calculations use a value called "the Dow divisor" to accommodate market fluctuations. According to NYSE , it is calculated on both price and total return basis.

Now, do you know the strange connection between a haircut and the stock market? Feedback We've Added New Words! Word of the Day. Meanings Meanings. Is it truly an average? The Dow, which is based on the prices of the individual stocks it includes, provides a hypothetical view of the collective change in the stocks of the index over time relative to change in industry stocks at large.

The Dow provides a means of comparison of the current representative value of the index versus that value at another time. The Dow Jones Industrial Average is a benchmark with which an investor evaluates the performance of his stock portfolio or industrial stocks at large. The investor considers the relative change of an index as well as the most current metric relative to individual industry stocks.

The change in an index from a prior day, the rise or fall in the index, is represented as a percent. Alternatively, the most current metric informs the investor of the stock's rise or fall in value relative to its baseline value.



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