Dow Jones Industrial Average

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About Dow Jones Industrial Average

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DJIA – Dow Jones Industrial Average

What is Dow Jones?

The Dow Jones Industrial Average (DJIA) was created by Wall Street Journal editor and Dow Jones and Company co-founder Charles Dow on May 26, 1896. DJIA is the second oldest US market index after the Dow Jones Transportation Average (DJTA), which was also created by Dow.

The Dow Jones Industrial Average (DJIA) is also called the Dow or Dow Jones is one of several well-known stock market indices in the USA. Dow Jones is a price-weighted average of the stocks of 30 large publicly traded or most important market-leading companies on the American Stock Exchange.

Dow Jones or more precisely Dow Jones and Company, is one of the largest business and financial news companies in the world. While the Dow Jones Industrial Average tracks publicly owned companies, Dow Jones and Company is not a public company itself.

How Dow Jones Index is calculated?

The Dow Jones Industrial Average (DJIA) was initially planned to measure the movements of companies within the heavy industry, similar to construction companies and businesses dealing with heavy products. Today, very few of the index’s 30 companies have anything to do with industrial goods.

The history of the Dow Jones Industrial Average (DJIA) all the way back to May 26, 1896. At that time, the index was consisting of 12 stocks and the calculation was very simple. They added the price of all 12 stocks, divided it by 12 and your index was ready. It’s as simple as that. Take the price of all the stocks and divide it by the total number of stocks in the index. In this way, the Dow Jones Industrial Average (DJIA) is nothing like most stock indexes.

The 30 blue-chip organizations, viewed as the pioneers of the economy, are picked by the editors of the Wall Street Journal, a practice that goes back to its initiation in 1896.

The Dow Jones Industrial Average (DJIA) is price-weighted, meaning that the movement in stocks with higher prices impacts the Dow more than stocks with lower prices. The Dow’s daily value is not the true average of the 30 stocks’ prices but is actually the sum of the prices divided by the Dow divisor, which is adjusted in cases of stock splits, spinoffs, and other structural changes to keep the weighting constant and maintain continuity.

The Dow is a standout amongst the most intently watched market benchmarks tracking stock market activity. Despite the fact that it was made to follow the performance of the US industrial sector, it presently is viewed as an intermediary for general market situations.

What is a price-weighted index?

A price-weighted index means that higher-priced stocks have more influence over the index’s performance than lower-priced ones. Consider a fictional index made up of just 3 stocks, with share prices of $10, $30, and $60. Since the highest-priced stock makes up 60% of the total combined value of the three, a 10% gain in that stock’s price would raise the index by 6%. In contrast, a 10% gain in the lowest-priced stock would only result in a 1% rise in the index.

In the case of the Dow Jones Industrial Average (DJIA), the prices of all 30 stocks in the index are added together and then divided by the Dow divisor, which changes over time due to stock splits and other events. The divisor is much less than one, which is why the value of the index is greater than the sum of the stock prices.

What time does Dow Jones open?

The value of the Dow Jones Industrial Average (DJIA) is based on stock prices, so the index value will only change when the markets are open and prices are moving. The U.S. stock exchanges are open from 9:30 a.m. to 4 p.m. Eastern time, Monday through Friday.

Throughout the market day, the value of the Dow Jones is updated every single couple of seconds. At the point when the markets are closed, the value of the index is based on the closing prices of the most recent stock market session for the 30 Dow stocks.