• Dr. Anna

What is the Dow Jones Industrial Average and Why Should I Care?

Daily stock market changes often appear embedded in discussions of the Dow Jones Industrial Average (DJIA) movement from the opening bell to the closing bell. Exactly what is the DJIA? Does it matter, and if so, why?

Created in 1896 by Charles Dow and Edward Jones, the index originally tracked the movement of 12 industrial companies. The index’s composition should reflect the economic makeup of businesses in the United States and accordingly, components changed over time while the number of companies included increased to the current level of 30 firms. A readily available explanation of how the index is calculated can be found here, but higher-priced stock cannot unfairly influence changes in the index and a one-point move for each stock has an equivalent weight. A list of companies in the index as of April 3, 2019 follows while tracking daily movements of the DJIA and its components can be found here from Investors Business Daily. Reviewing the list reminds us that we might also watch newly listed companies, firms with leading edge technology, or innovative business models to supplement our understanding of market movements.