Dow Jones Industrial Average (DJIA): What It Is and How It Works

An Overview of the DJIA

The Dow Jones Industrial Average (DJIA) is a stock market index that measures the performance of 30 large, publicly traded companies in the United States. It is one of the most widely followed stock market indices in the world and is often used as a barometer of the overall health of the U.S. stock market.

Calculation of the DJIA

The DJIA is calculated by taking the sum of the share prices of the 30 companies included in the index and dividing that total by the Dow Divisor. The Dow Divisor is a factor that is adjusted periodically to ensure that the index remains comparable over time.

History of the DJIA

The DJIA was created by Charles Dow and Edward Jones in 1896. It was originally composed of 12 companies, but the number of companies in the index has been expanded over time. The DJIA is one of the oldest stock market indices in the world and is considered to be one of the most important.

Conclusion

The Dow Jones Industrial Average is a valuable tool for investors who want to track the performance of the U.S. stock market. It is a reliable indicator of the overall health of the market and can be used to make informed investment decisions.