The Dow Jones Industrial Average (DJIA), is one of the oldest and most commonly referenced stock market indices in the world. It is composed of 30 of the largest and most influential companies in the United States and is used as a proxy for the U.S. stock market.
The Dow Jones Industrial Average traces its history back to the late 19th century. On May 26, 1896, Charles Dow, co-founder of Dow Jones & Company, created the index, which was then known as the Dow Jones Industrial Average of 12 stocks. The index was made up of 12 industrial companies including National Lead, U.S. Leather, and Tennessee Coal & Iron. The composition of the DJIA changed over the next few decades, and by 1928 the index had increased to 30 stocks.
The DJIA has grown to include 30 of the largest and most recognizable companies in the United States such as Apple, Microsoft, JP Morgan Chase and Coca Cola. These 30 companies are chosen by the editors of the Wall Street Journal, who take into account several factors including market capitalization, financial stability, and sector representation.
The DJIA has become one of the most popular and reliable gauges of how the U.S. stock market is performing, as it is heavily followed by investors, media, and business decision makers around the world. It is also used as way to measure the performance of the U.S. economy as a whole.
The DJIA is a price-weighted average, meaning that the larger the price of a stock, the more influence it will have on the indexs overall performance. This is different than a market-capitalization weighted index, which takes into account the total value of a companys stock. For this reason, it is important to remember that a price movement in one of the indexs 30 stocks can have a large impact on the broader index that may not be accurately reflected in the performance of the entire U.S. stock market.
The DJIA has a long history of being one of the most reliable barometers of the U.S. stock market. Despite its inherent limitations, it remains a key player in measuring the health of the U.S. economy.