What Is the Dow Jones Index?


Quick Answer

The Dow Jones Industrial Average is a stock market index created by former Wall Street Journal editor and Dow Jones & Company founder Charles Dow. It is a price-weighted average of 30 publicly owned companies in the United States trading on the New York Stock Exchange and Nasdaq.

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What Is the Dow Jones Index?
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Full Answer

The Dow Jones is one of the oldest market indexes in the world and has been in operation since 1896. The index includes major companies General Electric, Disney, Exxon, Microsoft and Apple. General Electric is the only member left that was an original Dow Jones member in 1896.

To compensate for the effects of stock splits and other adjustments, the Dow Jones uses a scaled average. This means that the value of the Dow is not the actual average of the prices of all of the companies’ stocks but rather the sum of the component stock prices divided by a divisor. The divisor changes whenever a stock splits or dividend payment made, so that the value generated for the index stays constant.

Although the index is used to gauge the performance of the American industrial sector, the index’s performance hinges not only on corporate and economic reports but also on events around the globe such as natural disasters and terrorism that carry potential economic harm.

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