What is the Dow Jones Industrial Average (DJIA)?

The Dow Jones Industrial Average (DJIA), commonly known as “the Dow”, is a weighted average of 30 stocks traded on the New York Stock Exchange or the NASDAQ Stock Market.

It reveals how 30 of America’s largest and most significant public companies have fared during a standard stock market trading day.

The index is operated by S&P Dow Jones Indices, which is owned by McGraw-Hill Financial.

The Dow Jones Industrial Average is one of the most monitored indexes in the United States, along with with the S&P 500 Index, the NASDAQ Composite, and the Russell 2000 Index. Major investors the world over carefully track the DJIA.

Charles DowCharles Dow developed the ‘Dow Theory’, a series of principles for understanding and analyzing market behavior. (Image: Wikipedia)

It is the second oldest U.S. market index after the Dow Jones Transportation Average (DJTE), which was created by Charles Henry Dow (1851-1902), an American journalist who also created the Wall Street Journal.

Charles Dow also created the Dow Jones Industrial Average, which he first calculated on May 26, 1896.



 

The original stocks to be included in the index were only industrial companies: General Electric, American Cotton Oil Company, American Sugar Company, American Tobacco Company, Chicago Gas Company, Distilling & Cattle Feeding Company, Laclede Gas Company, National Lead Company, North American Company, Tennessee Coal Iron and Railroad Company, U.S. Leather Company, and United States Rubber Company.

However, nowadays many of the companies that form part of the index have little or nothing to do with heavy industry, making the Industrial part of the name only historical.

How the Dow Jones Industrial Average is calculated:

In order to calculate the DJIA, the sum of the prices of all 30 stocks is divided the Dow Divisor. The Dow Divisor is currently 0.15571590501117 (as of July 20, 2014). However, the divisor is frequently changed in the case of spinoffs, stock splits or other structural changes.

Dow Jones Industrial Average formula

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

Dow Jones Industrial Average – Index Data


Dow Jones Industrial Average Companies:

Symbol

Company

Date Added

Industry

MMM

3M

1976

Conglomerate

AXP

American Express

1982

Consumer finance

T

AT&T

1999

Telecommunications

BA

Boeing

1987

Aerospace

CAT

Caterpillar

1991

Construction equipment

CVX

Chevron

2008

Oil and gas

CSCO

Cisco Systems

2009

Computer networking

KO

Coca-Cola

1987

Beverages

DD

DuPont

1935

Chemical Industry

XOM

ExxonMobil

1928

Oil and gas

GE

General Electric

1907

Conglomerate

GS

Goldman Sachs

2013

Financial services

HD

The Home Depot

1999

Home Improvement

INTC

Intel

1999

Semiconductors

IBM

IBM

1979

Computers and technology

JNJ

Johnson & Johnson

1997

Pharmaceuticals

JPM

JPMorgan Chase

1991

Banking

MCD

McDonald’s

1985

Fast Food

MRK

Merck

1979

Pharmaceuticals

MSFT

Microsoft

1999

Software

NKE

Nike

2013

Apparel

PFE

Pfizer

2004

Pharmaceuticals

PG

Procter & Gamble

1932

Consumer goods

TRV

Travelers

2009

Insurance

UNH

UnitedHealth Group

2012

Health care

UTX

United Technologies

1939

Conglomerate

VZ

Verizon

2004

Telecommunications

V

Visa

2013

Consumer Banking

WMT

Wal-Mart

1997

Retail

DIS

Walt Disney

1991

Broadcasting and entertainment

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