Dow Jones Industrial Average
The Dow Jones Industrial Average is a price-weighted index of 30 large, well-known US companies, and one of the oldest stock indices.
The Dow Jones Industrial Average, often called the Dow or the DJIA, was created by Charles Dow in 1896 and is one of the best-known stock market indices in the world. Today it includes 30 large US blue-chip companies from many industries, not just industrial ones.
Members are chosen by a committee at S&P Dow Jones Indices, which looks for companies with an excellent reputation, sustained growth and wide investor interest. Changes are made occasionally rather than on a fixed schedule.
The Dow is unusual because it is price-weighted. A stock with a higher share price has more influence than one with a lower share price, regardless of company size. The index value is calculated by adding the prices of all 30 stocks and dividing by the Dow divisor, a number adjusted over time for stock splits and membership changes.
Because of its small number of stocks and its weighting method, the Dow is considered a narrower view of the market than the S&P 500. Still, it remains widely quoted in the media.
Example: with price weighting, a $1 move in any member stock moves the index by the same number of points.