Dow Jones Industrial Average: A Comprehensive Overview
Understanding the Dow Jones Industrial Average (DJIA)
The Dow Jones Industrial Average (DJIA), commonly known as "the Dow," is a stock market index that measures the performance of 30 large, publicly traded companies in the United States. Created in 1896 by Charles Dow and Edward Jones, the DJIA is one of the oldest and most widely recognized stock market indices in the world.
Components and Calculation
The companies included in the DJIA are selected based on their industry sector, size, and importance within the U.S. economy. The index's value is calculated by summing the share prices of the 30 component companies and dividing the total by a divisor that adjusts for stock splits and stock dividends. The divisor is updated whenever there are significant changes in the component companies.
Importance and Usefulness
The DJIA is a widely used barometer of the U.S. stock market's health and performance. Investors and analysts track the DJIA's movements to gauge overall market trends and investor sentiment. It is also used as a benchmark for mutual funds, exchange-traded funds (ETFs), and other financial products that aim to track the U.S. stock market.
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