What is the Industrial Dow-Jones – DJIA’
Industrial Dow Jones (DJIA) is a price-weighted average price of 30 significant stocks traded on the new York stock exchange (NYSE) and Nasdaq. The DJIA was invented by Charles DOW in 1896.
Often referred to as “the DOW,” the DJIA is one of the oldest, one of the most popular indexes in the world and includes such companies as General electric, Walt Disney company, Corporation, Exxon Mobil and Microsoft. When TV networks say “the market today”, they are usually referring to the DOW.
Breaking down the ‘Industrial Dow-Jones – DJIA’
Named in honor of the founder of the index Charles DOW and his partner Edward Jones, Industrial average the Dow Jones was developed to serve as a mediator for the US economy. When the index began, it included just 12 companies, which were almost purely industrial character. First of aggregates in railroads, cotton, natural gas, sugar, tobacco and oil. General electric is only one of the original components of the Dow, which continues to is part of the index in 2018.
As the economy changes over time, changing the composition of the index. DOE usually make the changes when the company experiences financial difficulties and becomes less representative of the economy, or when a broader economic shift occurs and you want to make changes to reflect this.
How to calculate the Index
The index is a price-weighted index. This means that stocks with higher stock prices, given the greater weight in the index. During the creation of DOW, Charles DOW calculated an average of the addition of the prices of 12 of the DOW component stocks and dividing by 12. Over time, there were addition and subtraction in the index, such as the merger and stock split, that had to be accounted for in the index. When one of these events occurs, the divisor for the DOW is configured, the index will not be affected. That is why the Dow can stand on 17,000 while the sum of the prices of shares that make up is not nearly that number.
The change in the index over time
The index grew to 30 components in 1928 and was modified components in total 51 times. The first changes occurred just three months after the index was launched. In the first few years, until roughly the great Depression, there were many changes in its components. In 1932, eight stocks in the DOW were replaced. However, during this change, the Coca-Cola company and Procter & gamble co. was added to the index, two stocks that are still part of the DOW in 2018.
The recent dramatic changes in DOE took place in 1997, when the four index components have been replaced. Two years later, in 1999, more than four components of the Dow have been changed. The last change took place on 26 June 2018, when the walgreens boots Alliance, Inc. replaced the General electric company.
Components of the Dow
The table below alphabetically lists the companies included in the DJIA as of August 14, 2018:
Key historical dates for the DJIA
Below are some milestones hit in the DJIA:
- Mar. 15, 1933: the biggest one-day percentage increase of the index occurred during the bear market of the 1930-ies totaling 15.34 percent. In the end the Dow rose 8.26 points to close at 62.10.
- Oct. 19, 1987: the largest one-day percentage drop occurred on black Monday. The index fell 22.61 percent. But could not see the cause of the accident, although the trading program may have been a factor.
- September. 17, 2001: the fourth-largest one-day point drop — and the biggest at the time — was the first day of trading after the 9/11 terrorist attacks in new York. The Dow Jones fell 684.81 points, or about 7.1 percent. But it is important to note that the index was declining up to September. 11, losing more than 1000 points between Jan. 2 and September. 10. The DJIA, however, started doing deadlifts after the attack and regained all that I lost, closing above the 10,000 mark for the year.
- May 3, 2013: the Dow exceeded 15,000 for the first time in history.
- Jan. 26, 2018: the index reached its current record 26,616.71.