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what is the dow jones?
i mean, i always hear about it, but why is it 'the market'?
Answers
307 points
ShoeMan answered one year ago …
from the dictionary...
The most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company), a practice that dates back to the beginning of the century. The Dow was officially started by Charles Dow in 1896, at which time it consisted of only 11 stocks. The Dow is computed using a price-weighted indexing system, rather than the more common market cap-weighted indexing system. Simply put, the editors at WSJ add up the prices of all the stocks and then divide by the number of stocks in the index. (In actuality, the divisor is much higher today in order to account for stock splits that have occurred in the past).
http://www.tickerhound.com/dictionary/word/1563/Dow
115 points
InvestSmart answered one year ago …
When you hear of "the Dow", nine times out of ten it'll probably be in reference to the DJIA. The DJIA, or Dow Jones Industrial Average, is a price-weighted index of the top companies of US industrials. The Dow Jones Company reassesses the 30 companies that it uses in its index, in order to include what it considers the most comprehensive and indicative of the market, and will replace certain companies when it sees fit (usually as a result of downgrades or changes in market conditions). Of course, as is the case with most indices, the correlation of the index with the actual movement of the economy is not, and inherently cannot, be perfect. Also, price-weighted indices such as the Dow exhibit a downward bias as a result of stock splits, which occur more frequently in large, well-run companies like those in the DJIA. However, mathematical measures have been put into place to try to correct this (readjustment of the divisor). Furthermore, price-weighted indices are more strongly affected by movements in the prices of higher-priced stocks. Nevertheless, despite its flaws, the Dow has stood the test of time as the primary index covering US stocks. Dow Jones and Co. also have many other indices, which track different sectors of the economy, such as the transportation.
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