{"id":114599,"date":"2023-10-21T09:56:34","date_gmt":"2023-10-21T09:56:34","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=114599"},"modified":"2024-03-06T16:34:37","modified_gmt":"2024-03-06T16:34:37","slug":"dow-jones-industrial-average-djia","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/dow-jones-industrial-average-djia","title":{"rendered":"Dow Jones Industrial Average (DJIA)"},"content":{"rendered":"

What is the Dow Jones Industrial Average (DJIA)?<\/span><\/h2>\n

The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large and publicly traded U.S. companies.<\/p>\n

The DJIA, sometimes simply referred to as “the Dow”, is one of the oldest and most-watched benchmarks for the U.S. stock market.<\/p>\n

Overview of the Dow<\/span><\/h2>\n

The Dow Jones Industrial Average was created in 1896 by Charles Dow, co-founder of the Dow Jones & Company and founding editor of The Wall Street Journal.<\/p>\n

Originally consisting of just 12 industrial stocks, the index has evolved over time to reflect the changes that the U.S. economy has experienced.<\/p>\n

7 Key Features of the DJIA<\/h3>\n

\"Dow<\/p>\n

    \n
  1. It tracks 30 major U.S. companies trading on the New York Stock Exchange<\/a> and NASDAQ<\/a>. The components span across various industries excluding utilities and transportation.<\/li>\n
  2. The index serves as a proxy for the broader health and direction of the U.S. stock market and economy.<\/li>\n
  3. It is a price-weighted index, meaning stocks with higher per-share prices are given greater weight in the index.<\/li>\n
  4. The composition of the DJIA changes over time as companies become less relevant or impactful. Stocks are added and removed from the index based on the decisions made by a selection committee.<\/li>\n
  5. On average, the Dow components are changed only every two to three years. Changes are rare.<\/li>\n
  6. The price of the index is calculated by adding the per-share prices of the 30 stocks and dividing the sum by the Dow Divisor. The divisor allows the index to adjust for corporate actions like stock splits.<\/li>\n
  7. The DJIA is owned, managed, and published by the S&P Dow Jones Indices<\/a> company, a joint venture between S&P Global and the CME Group.<\/li>\n<\/ol>\n

    The DJIA Stocks\/Components<\/span><\/h2>\n

    The DJIA has evolved greatly since its inception back in 1896, when it tracked only 12 industrial stocks. It expanded to 20 stocks in 1916 and grew to its current 30 components in 1928.<\/p>\n

    These are the 30 companies currently in the DJIA as of October 2023:<\/strong><\/em><\/p>\n

    <\/span><\/p>\n\n\n\n\n\n\n\n\n
    American Express<\/span><\/td>\nCisco<\/span><\/td>\nHoneywell<\/span><\/td>\nMicrosoft<\/span><\/td>\nVisa<\/span><\/td>\n<\/tr>\n
    Amgen<\/span><\/td>\nCoca-Cola<\/span><\/td>\nIntel Corp.<\/span><\/td>\nNike<\/span><\/td>\nWalgreens<\/span><\/td>\n<\/tr>\n
    Apple<\/span><\/td>\nDisney<\/span><\/td>\nJohnson & Johnson<\/span><\/td>\nProcter & Gamble<\/span><\/td>\nWalmart<\/span><\/td>\n<\/tr>\n
    Boeing<\/span><\/td>\nDow<\/span><\/td>\nJP Morgan Chase<\/span><\/td>\nSalesforce<\/span><\/td>\nUnitedHealth Group<\/span><\/td>\n<\/tr>\n
    Caterpillar<\/span><\/td>\nGoldman Sachs<\/span><\/td>\nMcDonald’s<\/span><\/td>\nTravelers<\/span><\/td>\nIBM<\/span><\/td>\n<\/tr>\n
    Chevron<\/span><\/td>\nHome Depot<\/span><\/td>\nMerck<\/span><\/td>\nVerizon<\/span><\/td>\n3M<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    <\/div><\/span><\/p>\n

    Calculating the DJIA<\/span><\/h2>\n

    Unlike other major stock indexes, the Dow Jones Industrial Average is not weighted by market capitalization. Rather, it is a price-weighted index, making it unique among its peers.<\/p>\n

    The DJIA value is calculated by<\/strong>:<\/p>\n

      \n
    1. Adding up the per-share prices of all 30 component stocks.<\/li>\n
    2. Dividing the resulting total by the Dow Divisor.<\/li>\n<\/ol>\n

      The Dow Divisor, which currently stands at around 0.15, is adjusted periodically to account for corporate actions like stock splits to maintain the price continuity of the index despite these modifications.<\/p>\n

      Due to its price-weighting methodology, stocks with higher per-share prices have an outsized impact on index movement. A $1 change in a $100 stock price equates to a 100-point move in the index.<\/p>\n

      Understanding the DJIA vs. Other Major Indexes<\/span><\/h2>\n

      The DJIA is often compared to other major stock indexes like the S&P 500<\/a> and the NASDAQ Composite. Here are some key differences:<\/p>\n