What is the Dow Jones industrial average (DJIA)?

The Dow Jones Industrial Average is a widely-watched benchmark index in the U.S. for blue-chip stocks. The DJIA is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the Nasdaq. The index was created by Charles Dow in 1896 to serve as a proxy for the broader U.S. economy.

What is the DJIA Index?

The DJIA is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the Nasdaq. The index was created by Charles Dow in 1896 to serve as a proxy for the broader U.S. economy. The DJIA's composition can change over time based on economic trends.

Why is the DJIA a simple arithmetic average?

Early on, the initial divisor was composed of the original number of component companies; this initially made the DJIA a simple arithmetic average. The present divisor, after many adjustments, is less than one, making the index larger than the sum of the prices of the components. That is:

What if the DJIA was up 100 points?

Thus, if the DJIA was up 100 points on the day, Walmart was responsible for 34.42 points of the movement. The DJIA's methodology of calculating an index is known as the price-weighted method. Companies are ranked based on their share prices.