Dow Jones Industrial Average

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The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (/ˈdaʊ/), is a stock market index tracking the stock performance of 30 large companies listed on stock exchanges in the United States. It is named after founder Charles Dow and his business associate, statistician Edward Jones. It is maintained by S&P Dow Jones Indices and its components are selected by a committee.

The index is a price-weighted index; stocks with the highest price per share have the highest weighting in the index. The value of the index is the sum of the stock prices of the companies included in the index, divided by a factor, which is approximately 0.168 as of July2026[update]. The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split.

Because the DJIA only includes 30 components, many of which are highly correlated during periods of decline, and the fact that the components with the highest price per share have an undue weighting (Goldman Sachs has the highest weighting in the index and the index performed extremely poorly during the 2008 financial crisis due to the drop of then-component AIG), the DJIA is not considered representative of the U.S. economy and products tracking the index are not recommended as long-term investments by most financial advisors. However, in the long run, the index has performed in line with the broader S&P 500.

Products linked to the DJIA include index funds (exchange-traded funds/ETFs and mutual funds) as well as derivatives (options and futures contracts), which are available for trading in many countries with the goal of replicating the performance of the index. Also available are modified index funds; they replicate the performance of the index with modifications such as the use of covered call strategies, equal weighting, performance buffers, leverage, inclusion of only growth or value stocks, or exclusion of certain sectors, all with the goal of changing the risk/return and yield.

The ten components with the largest dividend yields are referred to as the Dogs of the Dow.

History

In 1884, Charles Dow created his first stock average featuring 11 stocks, mostly railroads, which later became the Dow Jones Transportation Average. It was published in his newsletter, Customer's Afternoon Letter, a daily two-page financial news bulletin which was the precursor to The Wall Street Journal. On February 16, 1885, the Dow Jones Average (DJA) launched as a 14-stock index. On January 2, 1886, the number of stocks represented in what is now the Dow Jones Transportation Average dropped from 14 to 12, as the Central Pacific Railroad and Central Railroad of New Jersey were removed. On May 26, 1896, the Dow Jones Industrial Average debuted with 12 industrial stocks at a starting value of 40.94.

Annual returns

The following table shows the annual returns of the DJIA since 1896:

Computation

The DJIA is computed as the sum of the prices of all thirty stocks divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; this initially made the DJIA a simple arithmetic average. The present divisor, after many adjustments, is less than one, making the index larger than the sum of the prices of the components. That is:

DJIA = ∑ p d {\displaystyle {\text{DJIA}}={\sum p \over d}}

where p are the prices of the component stocks and d is the Dow Divisor.

Events such as stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide:

DJIA = ∑ p old d old = ∑ p new d new . {\displaystyle {\text{DJIA}}={\sum p_{\text{old}} \over d_{\text{old}}}={\sum p_{\text{new}} \over d_{\text{new}}}.}

Since June29,2026,[update] the Dow Divisor is 0.16824816528350 and every $1 change in price in a particular stock within the average equates to a 5.943601 (or 1 ÷ 0.16824816528350) point movement.

See also

• List of Dow Jones Industrial Average companies
• Historical components of the Dow Jones Industrial Average
• Closing milestones of the Dow Jones Industrial Average
• List of largest daily changes in the Dow Jones Industrial Average
• William Peter Hamilton– Fourth editor ofThe Wall Street Journal, stock-market analyst

Further reading

• Biktimirov, Ernest N., and Yuanbin Xu. "Market reactions to changes in the Dow Jones industrial average index." International Journal of Managerial Finance 15.5 (2019): 792-812.

• Choudhry, Taufiq. "World War II events and the Dow Jones industrial index." Journal of Banking & Finance 34.5 (2010): 1022-1031.

• Stillman, Richard (1986). . Homewood, Ill.: Dow Jones-Irwin. ISBN9780870945861. OCLC.

• Yaqub, Kamaran Qader. "Effect of United States Monetary Policy and Macroeconomics on the Dow Jones Industrial Average Pre, during and Post Covid-19 Period." Raparin Journal of Humanities (RJH) 12.2 (2025): 675-707.

External links

• Business data for Dow Jones Industrial Average: