What is the Dow Jones Industrial Average?

current DJIA divisor

We hear and read about it all the time on the news and in papers. But what is it exactly? Is it crucial for us to understand what it is and how it is affecting our lives and investments? Now we will have the answer.

The Dow Jones Industrial Average (DJIA) is an index or average built to measure the industrial component of the performance of the US stock exchange. It was created in 1896 by Dow Jones & Company editor of The Wall Street Journal. Today, the “industrial” portion of the index is mainly historical because many corporations are not in heavy industry.

To compensate for the effects of stock splits and other adjustments, it is presently a scaled average, not the particular average of the costs of its element stocks-the sum of the component prices is divided by a divisor, which changes whenever one of the element stocks has a stock split or stock dividend, to generate the value of the index. The current DJIA originally consisted of twelve giant corporations only 1 of which, General Electric, is still now listed. Currently there are 30 companies present on the DJIA and these make up about 15-20% of the market valuation of the NY Stock Exchange ( NYSE ) .

The current DJIA are: 3M, Alcoa, American Express, AT&T, B. O. A, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, ExxonMobil, General Electric, General Motors, Hewlitt-Packard, Home Depot, Honeywell, Intel, IBM, Johnson & Johnson, JP Morgan Chase, Kraft Foods, McDonald’s, Merck, Microsoft, Pfizer, Proctor & Gamble, United Technologies Firm , Verizon, Wal-Mart & Walt Disney.

A cut of bread can tell us something about the rest of the loaf but that cut isn’t the loaf. It’s the same with the DJIA and other indices. We will study the final welfare of the stock exchange but the DJIA is not the market. It is an indicator like your blood pressure. We as a tool of measurement. Now when you watch the news and you hear about the daily performance of THE DOW, you will have an idea about what they are saying.