Dow Jones is a stock index made up of 30 of the most significant stocks, from all industries except transportation and utilities, which are traded on the New York Stock Exchange and Nasdaq.
Although it is not the official index of the New York Stock Exchange, since this is the NYSE Composite, it is the best known and used to monitor said market, the most important in the world.
Virtually Dow Jones could be any of the indices of the firm that bears the same name, but what they refer to when it is mentioned that the Dow Jones fell or rose, or simply the Dow, it is the Dow Jones Industrial Average (DJIA) index that It was devised by Charles Dow in 1896, making it the oldest index used worldwide to reflect an average value of public company shares on a stock market.
In its beginnings it measured the performance of 12 companies, all of them industrial, by 1920 it incorporated 8 more companies, to finally reach the current 30 in 1928. Since the index began to be used, the shares that comprise it have been called blue chips or blue chips, in analogy to the game of poker, where the blue chips have the highest value. The name reflects the quality of the companies that make up the index, whose market capitalizations are usually among the highest in the world, although this is not a requirement to make the list.
The index is owned by the firm Dow Jones & Company Inc. (acquired in 2007 by the media giant News Corp.), which publishes the financial and business daily Wall Street Journal, whose editors are responsible for making changes to the composition. of the index.
As of the date of the last update of this page (January 2017), the shares of the companies that make up the Dow Jones are:
| 3M Co. | Apple Inc. | American Express Co. |
| Boeing Co. | Caterpillar Inc. | Chevron Corp. |
| Cisco Systems Inc. | Coca-Cola Co. | Du pont |
| Exxon Mobil Co. | General Electric Co. | Goldman Sachs Group Inc. |
| Home Depot Inc. | Intel Corp. | International Business Machines |
| Johnson & Johnson | JP Morgan Chase & Co. | McDonald's Corp. |
| Merck & Co. | Microsoft Corp. | Nike Inc. |
| Pfizer Inc. | Procter & Gamble Co. | Travelers Co. |
| UnitedHealth Group Inc. | United Technologies Corp. | Verizon Communications Inc. |
| Visa Inc. | Wal-Mart Stores Inc. | Walt Disney Co. |
Because it is a balanced index, the ups or downs of the Dow on a given day generally reflect the behavior of all the stocks traded on the New York Stock Exchange (but they are only relevant when compared to a previous value), therein lies Its importance, in its ability to present investors and other agents with an overview of market behavior, the Dow thus becomes a measure of the pulse of the US economy and why not the world.
The following graph shows the variations of the index up to the last 10 years.
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Gitman and Joehnk (p.68) explain that the calculation of the value of the DJIA is simply the sum of the closing prices of the 30 shares that compose it, divided by a «divisor». The purpose of the divider is to make adjustments for any changes of companies, or divisions of shares of a company, or any other event that may occur over time. Without the divisor, whose calculation is complex, the value of the DJIA would be totally distorted. The divisor makes it possible to use the DJIA for intertemporal comparisons. The value of the divisor is listed in the Wall Street Journal table called "Dow Jones averages hour by hour".
As the DJIA results from the sum of the prices of the 30 stocks, those with the highest price tend to have a greater influence on the index than those with the lowest prices. for example, a 5% change in the price of a stock valued at $ 50 (ie $ 2.5) has less impact on the index than a 5% change in a stock valued at $ 100 (ie $ 5). Despite this and other criticisms, it is still the most widely used stock indicator.
In the following documentary on the history of the Dow Jones you can learn more about it, the world's best known and most widely used stock index.
Bibliography
Gitman, Lawrence J. and Joehnk Michael D. Investing Fundamentals, Pearson Education, 2005
