Article content

Dow Jones Industrial Average

The Dow Jones Industrial Average is a weighted stock market index of the market price of the 30 largest publicly-traded companies on the NYSE. All of these stocks are big American blue-chip companies. The Dow Jones Industrial Average was created in 1896 by the founder of the Wall Street Journal Charles Dow.

Dow Jones Industrial Average (Wikipedia)
Dow Jones Industrial Average
A historical graph. From its record low of under 30 in the late 1890s to a high reached above 14,000 in mid-2011, the Dow rises periodically through the decades with corrections along the way eventually settling in the mid-10,000 range within the last 10 years.
Historical logarithmic graph of the DJIA from 1896 to July 2011.
Foundation DJIA: May 26, 1896
(DJA: February 16, 1885)
Operator S&P Dow Jones Indices
Exchanges New York Stock Exchange
NASDAQ
Constituents 30
Weighting method Price-weighted
Website Dow Jones Averages

The Dow Jones Industrial Average /ˌd ˈnz/, also called DJIA, the Industrial Average, the Dow Jones, the Dow Jones Industrial, DJI, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. The industrial average was first calculated on May 26, 1896. Currently owned by S&P Dow Jones Indices, which is majority owned by McGraw Hill Financial, it is the most notable of the Dow Averages, of which the first (non-industrial) was first published on February 16, 1885. The averages are named after Dow and one of his business associates, statistician Edward Jones. It is an index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market. It is the second oldest U.S. market index after the Dow Jones Transportation Average, which was also created by Dow.

The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index. Since the divisor is currently less than one, the value of the index is larger than the sum of the component prices. Although the Dow is compiled to gauge the performance of the industrial sector within the American economy, the index's performance continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm.

<< Back to Glossary Index

Picture of SOFI artificial intelligence

SOFI AI For Premium Members