History: The Dow Jones Industrial Average (DJIA) is the world’s most well-known stock market index, and it represents the global equity market mood and global economic conditions. It started on May 26, 1896 comprising 12 stocks. The Dow Jones Industrial Average was created by Dow Jones & Company co-founder and Wall Street Journal editor Charles Dow. The index was created to measure the performance of the industrial sector of the American stock market. Dow first created the Dow Jones Transportation Average & then after created the Dow Jones Industrial Average. The Dow Jones Industrial Average consists of 30 stocks. The price-weighted average of the 30 stocks determines the index value.
The index is currently a scaled average & not the actual average of the prices of its component stocks. To compensate for the effects of stock splits and other adjustments,—the sum of the component prices is divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, to generate the value of the index. Since the divisor is currently less than one, the value of the index is higher than the sum of the component prices. Continue reading Dow Jones Industrial Average (DJIA)