Dow Jones Industrial Average (DJIA)

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    sebkuhnert
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    What is “the Dow”?

    The Dow Jones Industrial Average (DJIA) is an index of the largest 30 companies in the United States and is traded on the New York Stock Exchange and the stock NASDAQ.

    The DJIA has a number of nicknames – the Dow Jones, the Dow 30 and the Industrial Average. Most commonly, however, it is simply known as the Dow. It should not be confused with the Dow Jones Transportation Average.

    Purpose of the Dow

    The Dow is one of the most eagerly watched indices in the world by investors because it is highly indicative of US market sentiment and most representative of global attitudes towards stock. A testament to this is the fact that when analysts refer to the “the financial markets being up”, they are generally referring to the Dow.

    Although the Dow’s main purpose is to judge the performance of the industrial sector of the US economy, it also recognises events outside the control of the 30 key companies which may have a bearing on the strength of the stock markets. These could include acts of war, terrorism or political unrest which may occur abroad or at home, as well as natural disasters that could negatively impact the global or domestic economy.

    History of the index

    The index was invented in 1896 by Charles Dow, making it one of the oldest indices in the world (second only to the Dow Jones Transportation Average).

    In its early days it represented only 12 stocks from leading American industries before the number was expanded to the 30 largest publicly listed, and essentially most economically influential, companies in the US (excluding railroad stocks, which were and remain listed on the Dow Jones Transportation Average index).

    More info:
    Dow Jones Industrial Average wikipedia