the oldest among the existing indicators of the state of the US economy, based on a list of 30 leading US companies, first published in 1896 by The Wall Street Journal

Definition and concept of the Dow Jones index, industrial, transport, utilities and composite Dow Jones index, history of the Dow Jones index, properties and features of the Dow Jones index, structure and calculation of the Dow Jones index, dynamics of the Dow Jones index

Dow Jones Index is, definition

The Dow Jones Index isan indicator of the state of the US economy, which is calculated on the basis of the largest 30 companies. The list of these companies is dynamic and subject to change. It is compiled by the editors of The Wall Street Journal. The index was first published in 1896, named after its inventors. The Dow Jones Index is one of the simplest, but at the same time authoritative, indicators of the US economy. Therefore, knowledge of the dynamics of the index, its forecast are necessary for the success of any trader.

The Dow Jones Index is oldest among existing US market indices. It was created by the editor of The Wall Street Journal and the founder of Dow Jones & Company, Charles Dow, to track the development of US stock markets. The index was first published on May 26, 1896. Initially, the index was calculated as the arithmetic average of stock prices of the 12 largest companies. Now, a scalable average is used for the calculation to maintain the comparability of the index, taking into account changes in the internal structure of its constituent stocks.

The Dow Jones Index is the simplest and most commonly used indicator of the state of the US economy. The list of companies covered by the Dow Jones Index is being reviewed with the development of the situation on the stock market. This list is compiled by the editors of The Wall Street Journal. Currently, the Dow Jones index covers the 30 largest US companies.

The Dow Jones Index is one of several stock indices created by the editor of the Wall Street Journal and founder of the Dow Jones & Company Charles Dow. The first publication of the Dow took place on May 26, 1896. Initially, the index was calculated as the arithmetic average of all stock prices of 12 large US companies. Nowadays, a scalable average is used for calculation, which allows us to maintain the comparability of the index, taking into account all changes in the internal structure of its shares.

Dow Jones Index Dynamics

The Dow Jones Index is the oldest among all existing market US indices. It was developed by Charles Dow, editor of The Wall Street Journal, founder of the aforementioned Dow Jones & Company. The purpose of the index: tracking the development of US stock markets. This is the average indicator of stock prices of the group most large companies USA. It is published by Dow Jones & Company and is the arithmetic average of daily currency quotes at the time the exchange closed.

The Dow Jones Index isthe average stock price for major US campaigns published by the Dow-Jones company since the late 19th century. It is the arithmetic average (unweighted) daily quotes of a certain group of campaigns at the time the exchange closed. The method of calculating the DOW JONES INDEX has repeatedly changed. In modern conditions, several indices are published: for industrial campaigns on the basis of shares of 30 corporations (including American telephone and telegraph companies, Dupont de Neur, General Motors, etc.); railway campaigns (20 largest firms) and communal campaigns (15 firms). Based on the indicated indices, the general INDEX is calculated. The DOW JONES INDEX is an indicator of the current economic situation in the United States and reflects the reaction of American business circles to various economic and political events.

The Dow Jones Index is The average rate of shares of the group of the largest US companies. The index is published by Dow Jones & Company and presents the arithmetic average of daily quotes at the time of closing the exchange. Distinguish Dow Jones indices for shares of utilities, industrial and transport companies. The Dow Jones Index is an indicator of the current economic situation in the United States and reflects the reaction of American business circles to various economic and political events.

The Dow Jones Index is index calculated on stock prices of major US companies. Calculated by Dow Jones.

Overview of the largest companies in the world

The Dow Jones Index is arithmetic average of daily stock prices of a group of the largest US companies at the time of closing the exchange; published by the Dow Jones firm since the end of the 19th century, serves as an indicator of the current economic situation. The method of calculating the Dow Jones index has repeatedly changed.

The Dow Jones Index is The average rate of shares of a group of the largest US companies Named this way, as published by Dow Jones. Represents the arithmetic average of daily quotes at the time of closing the exchange.

What is the Dow Jones Index?

The Dow Jones Index is The average rate of stock prices of a group of major US companies published by Dow Jones. It is the arithmetic average (unweighted) of daily quotes of a certain group of companies at the time of closing the exchange.

The Dow Jones Index is index calculated on the stock prices of the 30 most quoted blue chips of the United States. The Dow Jones Index is the oldest continuously operating US market index. Its history goes back to the century before last and totals more than 100 years. The companies whose shares comprise the stock exchange index are changing, both their number (in 1896 - 12, in 1916 - 20, from 1928 to today - 30), and names (not all of the first companies participating in the Dow Jones index "survived" to this day).

The Dow Jones Index is a tool used in the work of large financial organizations in the formation of portfolios and funds. This use of the index is referred to as the benchmark. But to obtain more accurate analytical calculations on the stock market, as a rule, they use a comprehensive study of indices compiled by Standard & Poor`s, taking into account the performance of five hundred companies operating in the United States. And on the basis of a set of indices, stock market events are predicted and portfolios and funds are formed.

Standard & Poor "s - an American economic research rating agency

What is the Dow Jones Index?

What determines the value of a company's stock? Undoubtedly, the position of the company itself, as well as the general state of the market, are determining factors. The stability of the stock market contributes to rising stock prices of companies, whose situation is somewhat weakened. Conversely, exchange unrest cause a drop in stock prices of even the most promising companies. It was with the purpose of analyzing the “weather” in the stock market that stock indices were introduced. Each index has its own characteristics and scope. Indesk Dow Jones - perhaps one of the most famous stock indices.

The Dow Jones Index, the main and oldest index of stock activity, is named after two people: Charles Dow (1851-1902) and Edward Davis Jones (1856-1920). Charles Dow forever imprinted his name in that section of financial science, which is now called technical analysis of securities. However, at the beginning of his life, his relationship with finances was the same as with most people: they were always lacking. After all, C. Dow was born not in a family of financial oligarchs, but on a farm in Connecticut. The guy had to get involved in hard work very early. When he was six years old, his father died, and the family had to naturally fight for survival.

Therefore, C. Dow never finished high school. But he was not a dull village fool, and by the age of 18 he was already working as a correspondent for a well-known newspaper. One of the topics that interested the young journalist was business news. C. Dow's brilliant analytical articles very soon made his name popular among readers and business people. In 1882, he moved to New York and a year later founded here, together with partners, Edward Jones and Charles Bergstresser, the first publication devoted to the analysis of American business life. A small two-page daily newspaper gained popularity, and in 1889, the Wall Street Journal began publishing on its basis.

Today, this newspaper has safely exchanged the second century of its existence. She is a recognized leader in the American and world financial periodicals. And for its time it was just a revolutionary publication. Until then, no one has published daily stock reports. Information on the financial condition of companies was also published extremely rarely. The reason was obvious: executives, not without reason, feared that a publication disclosing the value of a company's assets could lead to its unfriendly takeover by larger corporations. A law that obliges securities companies to publish quarterly and annual reports, was adopted in the United States quite late, only in 1934.

Dow Jones Index Analysis Example

The rules of the game on the exchange were not changed by lawmakers, but journalist Charles Dow and statistician Edward Jones. To the general public, their newspaper might seem mortally boring. No funny stories from celebrity lives, no naughty gossip! The bulk of each issue was occupied by exchange rate tables, lines of numbers, and nothing more. Articles were devoted to the financial condition of companies listed on the stock exchange. Reading is indigestible too! But the Wall Street Journal was intended for a completely different reader, who “swallowed” it from the first to the last page, since its financial success depended on it. Or failure. In the same way, the chief of the general staff reads intelligence reports on the condition of the enemy army with great interest - also, as a rule, boring tables.

Stories about specific shootings and adventures of scouts are of little interest to him. Skirmish or pursuit are the most interesting places in adventure novels. But they usually mark the failure of the intelligence group. The newspaper C. Dow made very important information open to all, which few had before. Thus equalized large and small players on the exchange. Each became his own field marshal. The publication of the newspaper confronted C. Dow and E. Jones with the need to introduce some global measure of activity on the New York Stock Exchange.

To do this, they selected the ten largest companies whose shares were listed at that time on the stock exchange, and began to determine the average value of the securities of these companies daily. This was the first Dow Jones index. Naturally, the growth of this index was associated with an increase in the value of indexed companies (and, therefore, in a sense, of the entire American economy), and the fall recorded a fall in business activity and a decrease in the capital of the main players of the then business. Interestingly, among the ten largest companies selected by C. Dow and E. Jones to calculate their index, nine were railway. 1880s - the time of rapid construction of American railways.

By 1928, the number of companies in the group when calculating the Dow Jones index increased to thirty. It is interesting that since then the number of companies taking into account this index has not changed. The basis for calculating the Dow Jones index is those companies whose shares are traded only on the New York Stock Exchange, in addition, the selection is made in a thorough manner and does not depend on the popularity and position of the company. So, Microsoft has no influence on the formation of the Dow Jones Average, since its shares are listed on the NASDAQ. The calculation of the Dow Jones index is currently as complicated as possible, and the arithmetic average, originally laid down as the basis for this indicator, has lost its relevance today.

We can say that the Dow Jones Average is one of the most unique and moving stock indexes. The methodology for calculating it is based on many factors: the separation of shares, the emergence of new companies, etc. What makes the Dow Jones Index so popular and representative? And can a small base number of companies taken to calculate it have a significant impact on its size? Most probably not. To date, according to experts, the change in the Dow Jones Index depends on the absolute price of shares. In addition, the calculation of this index can be called relative. However, despite this, the Dow Jones index does not lose respect and popularity.

The current Dow Jones index (called the Dow Jones Industrial Average, or DJIA for short) is basically calculated the same way. Naturally, among the largest US companies displayed today there are no railway companies, but there are Microsoft, Coca-Cola and McDonald’s. The NASDAQ index is also calculated, which characterizes the activity of OTC securities purchase and sale transactions. In other countries, the stock market activity index is calculated in the same way as the average cost of capital of the largest national firms. But in each country, this index is called in its own way. The activity of the Tokyo exchange is evidenced by the NIKKEI index, and the business activity of the German economy is characterized by the DAX index.

There are 4 varieties of the Dow Jones index (industrial, transport, communal, composite Dow Jones index). The most famous of them is the Dow Jones Industrial Average. The Dow Jones Index is the oldest among existing US market indices.

World stock indices

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) issimple average stock price movement of the 30 largest industrial corporations. The Dow Jones Industrial Average is the oldest and most common among all stock market indicators. The prefix industrial is a tribute to history - many of the companies included in the index do not belong to this sector. Its composition is not unchanged: its components can vary depending on the positions of the largest industrial corporations in the US economy and on the market, however, in modern conditions such cases are quite rare. Its components account for 15 to 20% of the market value of shares listed on the New York Stock Exchange.

This index is calculated by adding the prices of the shares included in it and dividing the amount received by a specific denominator (which is adjusted by the amount of shares and dividends split in the form of shares that make up more than 10% of the market value of the issues, as well as component replacement and mergers and acquisitions). The Dow Jones Index is quoted in points. Over the course of more than a century of history, the composition of the Dow Jones Industrial Average has changed significantly - various companies either fell into it or disappeared away. Only General Electric invariably remained in place. In addition to Home Depot and SBC Communications, the DJIA also includes Intel and Microsoft, also listed on the NASDAQ market.

As a result, today we have the following list of the “thirty”: Alcoa, American Express, AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola, DuPont, Eastman Kodak, Exxon Mobil, General Electric, General Motors, Home Depot, Honeywell International, Hewlett- Packard, IBM, Intel, International Paper, JP Morgan, Johnson & Johnson, McDonald's, Merck, Microsoft, Minnesota Mining & Manufacturing, Philip Morris, Procter & Gamble, SBC Communications, United Technologies, Wal-Mart Stores, Walt Disney. Industrial Average - these are average prices But if one of these companies declares a stock split or dividend payment, the so-called current divisor decreases.

Dow Jones Index

Dow Jones Transport Index (DJTA)

The Dow Jones Transportation Index - The Dow Jones Transportation Average (DJTA) the average indicator characterizing the movement of stock prices of 20 transport corporations (airlines, railway and road companies). January 2, 1970 the Dow Jones Index of 20 stocks of railway. companies was modified to include shares of companies representing other types vehicle. It is now known that the stock index of transport companies is still an index of railroad stocks. companies, however nine railways shares were replaced by nine shares of companies of other modes of transport.

Thus, the number of shares in the index is still 20, and the total number 65, which makes up the aggregate Dow Jones index, remains unchanged. The transition to the system of revised indices was carried out by adjusting the dividers in order to obtain an index for shares of transport companies and an index for 65 shares. Additions and withdrawals (shares) led to the establishment of a divisor for the Dow Jones index for shares of transport companies at 4.084 (the former divider in the index for shares of railway companies was 4.721) and to the replacement of the divider 10.568 by the divider 10.141 to calculate the index 65 stocks. The Dow Jones Industry Group also provides information regarding other industries.

Dow Jones & Co. explained that the conversion of the railway stock index companies in the stock index of transport companies was dictated by fundamental changes in the structure of commercial transportation. At the end of the 19th century, when the stock index of railroads first appeared companies in the system g. D. transported both goods and passengers on a colossal scale. The time for cars, trucks, buses and planes has not yet arrived. Just 20 years ago by train. e. 62% of all intercity traffic was carried out, as the analysis of the tonnage and mileage in miles has shown. However, by 1969 this figure dropped to 41%. Over the same 20-year period, the share of commercial freight transport almost doubled, rising sharply from 11 to 21%, while the rest of the work was carried out by pipelines, water vehicles and airplanes.

By 1969, the total number of passengers on intercity lines was reduced to 1.2% compared with almost 10% two decades ago, as calculations show: passenger-mile journeys. In 1969, 86% of the total number of passengers who previously preferred intercity trains used private cars, 9.4% by planes, and 2.5% by buses. When revising the index, the declining shares of the railway lines were also taken into account. companies due to the merger of leading railways companies and the transformation of some railways companies in non-transport.

All about the Dow Jones Index

Dow Jones Community Index (DJUA)

The Dow Jones Utility Average Index (DJUA) is average stock price movement of 15 gas and electricity companies. The Dow Jones index for shares of utility companies began to be applied in 1929 for 20 shares, including shares of Commonwealth & Southern and Niagara Hudson Power, which were on sale during the whole of 1929, so when calculating backdating the average value for the whole of 1929, the constant divisor method was applied, and the calculation was made on the basis of 18 shares for the period during which the shares of these two companies did not go on sale. On June 2, 1938, the number of shares for settlements was reduced to 15.

Composite Dow Jones Index (DJCA)

The Dow Jones Composite Average Index (DJCA) is an indicator compiled on the basis of the Dow Jones Industrial, Transport and Utility Indices. The Dow Jones Composite Index is calculated for 65 stocks. The composite average value was a simple arithmetic mean value for 70 shares, which at the time of calculation were included in the number of industrial shares. and utility companies, which calculated the Dow Jones Industrial Average starting from November 9, 1933. The number of shares was 65 after June 2, 1938, when the number of shares for calculating the average index for shares of utility companies decreased from 20 to 15. Changes in the constant divider method were introduced on May 10, 1945

Dow Jones Index History

People who plan to connect their activities with exchanges will certainly come across the concept of exchange activity index or, as it is called, the Dow Jones index. Let's see how it appeared and what it means. “Why do we need all this? After all, we are going to work not in the stock market, but in the foreign exchange! ”, You say. Reasonably! But the whole point is that the dynamics of the stock market has a very significant impact on the Forex currency market. Stock indices clearly show us the health of the national economy as a whole and its individual sectors in particular. If, for example, the US economy shows good growth, investors around the world rush to buy shares of American companies, which causes not only an increase in the prices of these shares, but also an increase in the rate of the US national currency - the dollar.

And therefore, keep in mind: when the Forex market does not have its own drivers for movement, as a rule, it begins to move in line with the dynamics of stock markets: national indices are growing - the national currency is growing. We hope that now you understand why currency traders around the world are closely monitoring stock market indices? Then we begin to get acquainted with the index number 1.

Dow Jones Index for Dummies

Charles Dow and the Wall Street Journal

Charles Doe became famous in the field technical analysis securities, despite the fact that he was born in a poor family of a farmer from Connecticut, where finance was always in short supply. The situation was aggravated by the fact that when Charles was 6 years old, his father died, and the boy had to go to work early. He never finished high school. However, from the age of 18, Dow served as a journalist in a local newspaper and was especially interested in business news. He wrote analytical articles so well that it brought him fame not only among ordinary people, but also among serious business people. Therefore, it is not surprising that just a year after moving to New York, Charles Dow founded an analytical newspaper that covered the events of US business life. His partners were Charles Bergstresser and Edward Jones. In 1889, the famous Wall Street Journal began to develop on the basis of this publication.

The Dow newspaper published stock reports, tables with exchange rates, information on the financial condition of companies listed on the securities market - in short, all that had previously been tacitly prohibited. Despite the fact that the legislative publication of quarterly reports of companies was only allowed in 1934, Dow and Jones changed the rules of the game on the stock exchange much earlier. The Wall Street Journal did not print anything funny, no gossip and crosswords, so it was of no interest to the average person. However, knowledgeable people literally read the newspaper to the holes, because their financial success depended on the information that was placed there.

Who is Charles Dow?

First Dow Jones Index

Dow set out to create a kind of "barometer" of the stock market, that is, an indicator that can quantitatively - in the form of a single figure - express the "health" of the market as a whole. The task is more than important: after all, at one and the same time, the value of the shares of some companies is growing, others - falling, third - remains unchanged. But how to assess the condition of not a single firm, but the entire American stock market as a whole? Mr. Dow found the answer to this question. July 3, 1884 his "barometer" was created. The method was simple, like all ingenious: the journalist simply began daily to calculate the average closing price of the shares of eleven companies. Some stocks could rise in price, others could fall, but a change in their average price allowed us to see some general trend.

Of course, this first index was far from ideal. Firstly, there are only eleven companies. Secondly, almost all of them were railway companies, that is, in fact, the index did not show “well-being” of the entire national stock market, but rather its railway sector (it was later called the “railway index”). However, the proverb “the first pancake is lumpy” is by no means appropriate here. After all general principle a quantitative measurement of market dynamics was still invented.

The advent of the industrial index

Apparently, Dow himself was aware of the "bias" of his brainchild in the transport direction, and therefore in 1896 he created another index - industrial. It was calculated on the basis of shares of twelve industrial companies and was called DJIA (Dow Jones Industrial Average). By the way, in the name of this index, in addition to the surname of Dow himself, there is the surname of his companion in the publishing business Edward Jones. Of the twelve companies, only General Electric is represented in today's version of the index. The remaining 11 companies were:

Dow Jones Indices

Change stock index list

At first, the index appeared irregularly, and its daily publication in The Wall Street Journal began on October 7, 1896. In 1916, the industrial index expanded to 20 stocks, in 1928 the number was increased to 30, which remains today. In 1928, newspaper editors began calculating the index using a different divider instead of the number of shares in order to avoid distortion, in cases where companies lower the face value of shares or when one share is replaced by another. Out of habit, this index continued to be perceived as "average."

In addition, the calculation formula was complicated in order to prevent a sharp change in the index value in such cases as, for example, “splitting” of shares. In fact, imagine: one of the companies included in the index suddenly decided to “split up” its shares - for example, it announced that from now on the owner of one share at a price of $ 10 is considered the owner of two shares at $ 5. But the index is calculated as an average of 30 shares. And suddenly, one share of the thirty fell twice in price. As a result, the entire index swung down, although there were no objective reasons for this.

Dow Jones Index Nowadays

To avoid such distortions, some changes have been made to the DJIA calculation formula. Since then, for over eighty years, the Dow Jones industrial index has faithfully served analysts and stock market traders (as well as us, currency speculators). Now all 30 companies whose shares are represented in the Dow Jones Industrial Average are leading in their sectors, and a large number of private and institutional investors hold these shares. These 30 companies account for about 1/5 of the market value of all US stocks ($ 8 trillion) and about a quarter of the value of stocks listed on the New York Stock Exchange.

The use of such large, highly liquid stocks in the index creates an important feature of the industrial index - relevance. At any time during a trading session, the current Dow Jones Industrial Average is based on the most recent transactions. DJIA is the most famous of the Dow Jones family indices. It is he who is meant when they say "Dow Jones collapsed" or "Dow Jones opened in the green zone" (the word "industrial" is omitted for brevity). Every half hour, the New York Stock Exchange, on which the shares of its thirty leading US industrial companies are listed, publishes its latest value.

Stock index concept

Dow Jones Index Properties

Most experts believe that the Dow Jones index includes not so much fast-growing as undervalued companies. Such a statement cannot, however, be considered absolutely fair. Say Alcoa (AA) at the beginning of 1999 was considered an undervalued company and sold at 30. Six months later, the company's shares were sold at 45, i.e. her performance improved by 50 percent. A legitimate question arises: should not we consider stocks that could so sharply rise in price, soaring when their value was 30? Or, if at a price of 30 stocks were underestimated, do they remain the same now? The division of shares into fast-growing and undervalued is very conditional.

Classification, in our opinion, should primarily be based on price. The attitude to the stock is still too much affected by its “image”. Figures, not image, should be taken into account by the investor. One thing is certain for sure about the companies in the Dow Jones Index: many of them are cyclical in nature. Stocks such as DD, GM, and IP are securities of mature, mature companies that have long been part of the index of companies. Cyclical companies are characterized by the fact that their prices rise and fall depending on the ups and downs of the economy as a whole. The fact that Dow Jones employees are determined to make as few changes as possible to the index should be taken into account.

Dow Jones believes that by avoiding sharp shuffles, compilers make their index an especially reliable tool to track the fate of certain stocks in a wide variety of market conditions. Dow Jones experts believe that stability is the quality that investors value the Dow Jones Industrial Average most. In other permutation indices, the matter is much more familiar. For example, stocks of a company are excluded from the S&P 500 every month.

Another important property of the Dow - Jones index is the following: this index mainly covers the shares of large companies. Most small companies are not represented in any way - however, it cannot be argued that the fate of the index does not reflect their fate at all. Events taking place in the global economy affect the shares of companies included in the Dow Jones index, and those, in turn, determine the behavior of other indices. The Dow going up is a sign of the well-being of society, a sign that even the smallest companies will read and interpret in their own way.

The work of the largest US companies

Dow Jones Index Features

The peculiarity of the Dow Jones index is that it shows the average current stock prices without comparing them with the base value. Therefore, the index must be considered in comparison with a certain value, taken as the basis for comparison (by a certain date).

Dow Jones Index Benefits

The most important advantage of the Dow Jones Index over other indexes in America (such as the S&P 500) is that the Dow Jones Index has stood the test of time. The index was founded in the XIX century, and still retains its popularity and relevance. Such a long success makes the Dow Jones Index classic representative US stock market. The companies included in the Index are the so-called “blue chips”, very reliable and stable.

The concept of blue chips

Dow Jones Index Deficiencies

One of the significant drawbacks of the Dow Jones index is the way it is calculated - when calculating the index, the prices of the shares included in it are added up and then divided by a correction factor. As a result, even if one company is noticeably less in terms of capitalization than another, but the value of one of its shares is higher, then it has a stronger effect on the index. Even a large percentage change in the price of a relatively cheap stock can be offset by an insignificant percentage change in the price of a more expensive stock. Despite its popularity, with the growth and development of the US economy, the Dow Jones Index less and less reliably reflects the market situation. There are more than 10 thousand joint-stock companies in the United States, and a sample of the 30 largest and most stable cannot justly represent the entire population. Because of this, many analysts and traders choose the S&P 500 Index, which contains 500 companies, which, for objective reasons, more reliably represents the entire US stock market than the Dow Jones Index.

Reasons for the Dow Jones popularity

Oddly enough, the Dow Dojones Industrial Average (DJIA) is still the stock market barometer and most popular index. The main reason for the popularity of this index is simple: it works. At all times, starting in 1896, this index indicated to investors the main trends in the development of the securities market. Dow displays the fall and rise in prices with the same accuracy as the S&P 500. In 95 cases out of 100, the readings of both indices converge. Dow has another very attractive quality: the principle of its action is clear to people. Dow offers us to perform the usual operation: add up the prices, then to divide them. The mechanism of the index is unchanged, except perhaps the divisor. The “splitting” of stocks, substitutions of securities, and other factors led to the fact that the divider was changed in 1928, and since then, specialists from Dow Jones regularly correct it.

Most other indices are weighted by capitalization, which means that the change in the price of a company is multiplied by its size (capitalization). As a result, large companies have a more noticeable effect on the index than small ones. The Dow Jones Index is weighted only by value. A change in the price point of a small company is just as significant as a change in the price of a huge company. Which of the two approaches is more correct? Experts still haven’t answered this question unambiguously. The Dow Jones Index is particularly respected by private investors. The bull market, the rise of which we are experiencing today, is literally flooded with “private” money - from money received as bonuses by company employees to options issued to senior managers as a reward. We can say with confidence: few of the financiers foresaw the huge demand for working with portfolios of private investors, which is typical for the stock market in recent years.

Stock market activity

The popularity of the Dow Jones index among private investors is understandable. People like the fact that the index includes the very companies whose shares they acquire for the portfolios - usually these are notable companies whose names are always well-known. In addition, it is always easier for non-professionals to work with a small number of items. Typically, private investors compose portfolios of shares of 20 - 25 companies, which is why they are closer to the index analyzing the activities of 30 enterprises than those that include 500, or even 2000 types of securities.

Dow Jones Index Composition

Dow Jones is the oldest among existing US market indices. This index was created to track the development of the industrial component of US stock markets. The index covers the 30 largest US companies. The prefix “industrial” is a tribute to history - at present, many of the companies included in the index do not belong to this sector. Initially, the index was calculated as the arithmetic average of stock prices of the companies covered. Now, a scalable average is used for the calculation - the sum of prices is divided by a divisor, which changes every time the shares in the index are split (split) or combined (consolidated). This allows you to maintain the comparability of the index taking into account changes in the internal structure of its constituent stocks.

The list of companies covered by the Dow Jones Index is being reviewed with the development of the situation on the stock market. This list is compiled by the editors of The Wall Street Journal. All thirty companies whose shares are represented in the Dow Jones Industrial Average are leading companies in their respective industries. A huge number of investors hold precisely the shares of these companies. The shares of these thirty companies are about one fifth of the market value of all America's shares. They make up a quarter of the value of all shares listed on the New York Stock Exchange.

On October nineteen nineteen eighty-seventh, the stock market was gripped by a crisis. In just under seven hours, industrial stocks fell twenty-three percent. This meant a reduction in securities transactions by five hundred and three billion dollars. For two months, exchange transactions fell by about one trillion dollars, that is, thirty-six percent. At that time, six hundred and four million shares participated in the auction, the computers of the stock exchange were simply overloaded.

Technical analysis of stock markets

The editors of The Wall Street Journal are carefully selected to list companies. Preference is usually given to companies that have a high market value, which are owned by various investors or individuals, the company should have regular dividends and income, and the company should occupy a leading position in its industry. The Dow Jones Industrial Average currently covers the companies listed below.

Public company 3M Co.

3M Co. - this is American diversified manufacturing company. Headquarters - in the city of St. Paul, Minnesota (USA). The president and chairman of the board of directors is Inge Tulin. Today, the company’s enterprises in 60 countries produce more than 50 thousand items of goods for medicine and various industries, including automotive, oil and gas, mining, etc. (abrasive, adhesive materials, etc.).

American Express Co.

American express Co. - this is american finance company. Well-known products of the company are credit cards, payment cards and travelers checks. The company is headquartered in New York. Ordinary shares of the company are traded on the New York Stock Exchange. This is one of the 30 companies that include the Dow Jones Industrial Average. In 2008, Sberbank of Russia became the world leader in the sale of American Express traveller's checks (over $ 1 billion). In 2013, American Express took 51st place in the ranking of 100 best employers, which is published every year by Fortune.

AT&T Media Conglomerate

AT&T is one of the largest US telecommunications companies and one of the largest media conglomerates. It is the largest provider of both local and long-distance telephony in the United States, as well as one of the largest providers of wireless services in the United States (85.1 million users). The total number of AT&T customers is more than 150 million people. Headquarters - in Dallas, Texas.

The company provides services in the field of telephony, long-distance communications, Internet access, cable television, etc. At the beginning of 2006, AT&T served over 50 million telephone lines. The total number of employees is 294.6 thousand people. The number of employees is 303.5 thousand people. The company's revenue for 2010 amounted to $ 124.28 billion (in 2009 - $ 122.51 billion), operating profit - $ 19.57 billion ($ 21.0 billion), net profit - $ 20.18 billion ($ 12.44 billion).

Boeing Co. Corporation

Boeing Co. - this is American corporation. One of the world's largest manufacturers of aviation, space and military equipment. Headquartered in Chicago (Illinois, USA). The corporation consists of two main divisions: Boeing Commercial Airplanes (civilian products) and Integrated Defense Systems (military products). In addition, the corporation includes Boeing Capital Corporation (project financing issues), Shared Services Group (infrastructure support) and Boeing Engineering, Operations & Technology (development, acquisition and implementation of innovative technologies and processes).

The main production facilities of the company are located in the state of California. The company produces a wide range of civil and military aircraft, being, along with Airbus, the largest aircraft manufacturer in the world. In addition, Boeing produces a wide range of aerospace military equipment (including helicopters), and conducts large-scale space programs (for example, the CST-100 spacecraft).

Public company Caterpillar Inc.

Caterpillar Inc. - this isamerican corporation. One of the leading manufacturers of the largest construction equipment in the world. It produces earth moving equipment, construction equipment, diesel engines, power plants (working on natural and associated gases) and other products, as well as shoes. Recently, also protected mobile phones and smartphones. With more than 480 units located in 50 countries on five continents. In Russia, it has its own plant in the Leningrad Region, in the city of Tosno (since 2000).

Cisco Systems Inc.

Cisco Systems is American multinational company developing and selling network equipment. Seeks to present a full range of network equipment, and thus provide the customer with the opportunity to purchase absolutely all the necessary network equipment exclusively from Cisco Systems. One of the world's largest companies specializing in high technology. Initially, it dealt only with corporate routers.

Cisco calls itself "the world leader in networking for the Internet." Cisco Systems has created a multi-level, ramified certification system for computer network engineers. Due to the fact that the exams of this system test knowledge of not only Cisco products, but also knowledge of network technologies and protocols, many organizations, even working on network equipment of other companies, recognize the value of professional Cisco certificates. In particular, expert-level certification (CCIE) is one of the most well-known and respected in the computer industry.

Chevron Energy Company

Chevron Corp. - this is the second after the ExxonMobil integrated US energy company, one of the largest corporations in the world. The company ranks 5th in the Fortune Global 500 (2009). Included in the list of Fortune 1000 according to the results of 2005 (3rd place). Headquarters - in the city of San Ramon, California (USA).

The company conducts oil production in various regions of the world. She owns a number of refineries, as well as an extensive network of gas stations. Chevron's proven oil reserves are 13 billion barrels. In 2007, the company produced 87.8 million tons of oil (in 2006 - 86.6 million tons) and 50.2 billion m³ of gas (49.56 billion m³). The company's revenue in 2007 amounted to $ 214.1 billion (in 2006 - $ 204.89 billion), net profit - $ 18.7 billion ($ 17.14 billion).

The coca-cola company

Coca-Cola Co. - this is soft drink made by The Coca-Cola Company. Coca-Cola was recognized as the most expensive brand in the world in 2005-2011 in the rating of the international research agency Interbrand. Today, this drink is sold in more than 200 countries.

The Coca-Cola drink was invented in Atlanta (Georgia, USA) on May 8, 1886. Its author is a pharmacist John St Pemberton, a former officer in the Confederate Army of America (there is a legend that he was invented by a farmer who sold his prescription to John Stit for $ 250, as John Stet allegedly said in an interview). The name for the new drink was invented by Pemberton's accountant, Frank Robinson, who also, using calligraphy, wrote the words “Coca-Cola” in beautiful curly letters, which are still the logo of the drink.

E.I. du Pont de Nemours and Company

E.I. du Pont de Nemours & Co. - this is American chemical company, one of the largest in the world. Included in the list of Fortune 1000 according to the results of 2008 (81th place). Headquarters - in Wilmington, Delaware and in Geneva (Switzerland). It was founded in 1802 as an enterprise for the production of gunpowder. DuPont produces a wide range of chemical materials, conducting extensive innovative research in this area.

The company is the inventor of many unique polymeric and other materials, including neoprene, nylon, teflon, Kevlar, Mylar, Tyvek and others. The company was the developer and main manufacturer of freons used in the manufacture of refrigeration devices. In 1968, the company introduced the world's first fully automated discrete chemical analyzer for blood and serum. In 2004, DuPont sold its textile business to Koch Industries, losing with it one of its most successful brands, Lycra. The number of employees is 70,000 (2012). The company's revenue in 2005 amounted to $ 26.6 billion. The US Army used the Dupon Napalm and Defoliants during the Vietnam War.

Oil company Exxon Mobil

Exxon Mobil Corp. - this is American company, the largest private oil company in the world, one of the largest corporations in the world in terms of market capitalization ($ 417.2 billion as of January 28, 2013, $ 336.5 in May 2009 according to a market capitalization rating of FT 500). In 2007, she took 2nd place in the list of the largest publicly traded American companies Fortune 1000 and in the list of the largest global corporations Fortune Global 500 (the lists were compiled according to the 2006 revenue).

The company is headquartered in Irving, a suburb of Dallas, Texas. The company carries out oil production in various regions of the world, including the USA, Canada, the Middle East and others. ExxonMobil has a share in 45 refineries in 25 countries, has a network of gas stations in more than 100 countries. Proved reserves - 22.4 billion barrels of oil equivalent.

General Electric Corporation

General Electric Co. - this is American diversified corporation, a manufacturer of many types of equipment, including locomotives, power plants (including nuclear reactors), gas turbines, aircraft engines, medical equipment, household and lighting equipment, plastics and sealants. In 2011, the company ranked third in the list of Forbes largest public companies, and was the world's largest non-financial TNCs, as well as a major media concern. The company is headquartered in Fairfield, Connecticut (USA).

The most famous chairman of the board was Jack Welch. The current chairman and chief executive officer is Jeffrey Immelt. The company is owned by a large number of institutional and individual investors, mutual funds, none of which have a significant (more than 5%) shareholding. As of December 31, 2009, State Street Corporation (3.51%) and investment company Vanguard Group Inc. owned the largest stakes. (3.36%). In addition, a large number of shares belonged to mutual funds.

Goldman Sachs Group Inc. conglomerate

The Goldman Sachs Group Inc. - this is one of the largest commercial banks in the world (until September 2008 - an investment bank), which is a financial conglomerate, in the circle of financiers is known as “The Firm”. Since September 20, 2013 it has been included in the Dow Jones Industrial Average. The bank was founded in 1869, with headquarters in New York, Lower Manhattan. The chairman of the board of directors is Lloyd Blankfein, and the president is Gary Cohen. The market capitalization of the bank as of July 2013 is $ 78 billion.

The company's business is divided into 3 key divisions: investment banking, exchange trading and asset and securities management.

Trading network Home Depot

Home Depot Inc. - this isamerican retail chain, the largest in the world in the sale of tools for repair and building materials. The company is headquartered in Winings, Georgia. The company employs 355 thousand employees. The network operates 2,144 stores in the United States, Canada, Mexico and China. The Home Depot is one of the largest retailers in the United States. The company ranks 101st on the 2011 Fortune Global 500 list.

Intel Corp.

Intel Corp. - this is an American corporation that manufactures a wide range of electronic devices and computer components, including microprocessors, chipsets, etc. The headquarters are in Santa Clara, California, USA. Intel is the world's largest microprocessor manufacturer, occupying 75% of this market in 2008. The main buyers of the company's products are manufacturers of personal computers Dell, Hewlett-Packard and Apple.

In addition to microprocessors, Intel produces semiconductor components for industrial and network equipment. The company's revenue in 2011 was $ 53.99 billion (an increase of 24.7%, in 2010 - $ 43.62 billion), net profit - $ 12.94 billion (an increase of 12.89%, in 2010 - 11.46 billion.

International Business Machines Corp.

International Business Machines Corp. - this is is a multinational corporation headquartered in Armonk, New York (USA), one of the world's largest manufacturers and suppliers of hardware and software, as well as IT services and consulting services. The corporation is represented in almost all countries of the world. By the end of 2010, the largest number of company employees was working in the USA (105 thousand, about 27%), in India 75 thousand people (about 19%) were employed at IBM permanently.

The company came to the USSR in 1974. In 2006, IBM opened a research laboratory in Russia to develop mainframe technologies. For three years, the company was going to invest about $ 40 million in it and increase the number of employees from the current 40 to 200 people. The project "IBM School of Technology" is also being implemented.

JPMorgan Chase and Company

JPMorgan Chase and Co. - this is one of the oldest financial conglomerates on the planet. Financial institution, housed in New York, is a leader in investment and commercial banking. Assets of $ 2.3 trillion put JPMorgan Chase in first place among the largest banks in the United States - ahead of Citigroup and Bank of America. The hedge fund managed by JPMorgan Chase is the second largest fund of its kind in the United States with assets of $ 28.8 billion (2006). Formed by the merger of Chase Manhattan Corporation and J.P. Morgan & Co., a company serving millions of customers in the United States.

Johnson & Johnson Inc.

Johnson & Johnson Inc. - this is American company, a major manufacturer of cosmetic and sanitary products, as well as medical equipment. Included in the Fortune 1000 list. Headquarters - in the city of New Brunswick, New Jersey (USA). Johnson & Johnson launches a wide range of medicines, body care products under the trademarks of JOHNSON’S Baby, Neutrogena, o.b., Carefree, Reach, Clean & Clear, RoC, contact lenses Acuvue, etc. The company also manufactures various materials, tools, equipment and technologies for medical institutions.

The corporation includes about 230 subsidiaries in more than 50 countries; Johnson & Johnson products are sold in over 175 countries. The total number of employees is more than 116 thousand people (2006). The company's revenue in 2008 amounted to $ 63.7 billion, net profit - $ 12.9 billion.

McDonald’s Corporation

McDonald’s Corp. - this is American corporation, until 2010, the world's largest chain of fast food restaurants. At the end of 2010, the company ranks 2nd in the number of restaurants worldwide after the Subway restaurant chain. Included in the 2011 Fortune Global 500 (403rd place). The company's headquarters is located in Oak Brook - a suburb of Chicago, USA. As of mid-June 2009, under the McDonald’s trademark, there were 32,060 restaurants in 118 countries of the world (including about 14,000 of them located in the USA). Of these, a significant part (25,578) was controlled by franchising, so the range of restaurants, the size and composition of servings can vary greatly in different countries.

By the end of 2010, 32,737 restaurants were operating under the McDonald’s brand worldwide (thus, McDonald’s lost the Subway chain to the championship). One of the most developing projects of the company in recent years has become a chain of coffee houses "McCafé". The total number of company employees in 2008 was about 400 thousand people. The company's revenue in 2008 amounted to $ 23.5 billion (in 2007 - $ 22.8 billion), operating profit - $ 4.3 billion ($ 2.4 billion), net profit - $ 2.6 billion ($ 2.3 billion). In 2010, the corporation's revenue reached a record $ 24.07 billion. At the same time, McDonald’s net profit was $ 4.94 billion.

Merck & Co Corporation. Inc.

Merck & Co. Inc. - this is The oldest pharmaceutical and chemical company in the world, founded in 1668 by Friedrich Merck. Headquartered in Darmstadt, Germany. In North America, known as EMD. The activities of Merck Group companies located around the world are carried out in two main areas - pharmaceutical and chemical. The pharmaceutical business of the company includes the development and production of prescription, or licensed, drugs, generic drugs (generics) and drugs for free retail sale.

Pharmaceutical products (Nasivin, Concor, Cebion, etc.) are represented on the Russian market by Nycomed. Over 30% of revenue comes from the production of liquid crystals for mobile phones, TVs and computer displays, mother-of-pearl pigments for packaging and cosmetics, cosmetic ingredients, solvents and supplies for HPLC and TLC, granular microbiological media, instruments and rapid tests for analytical laboratories. The following biochemical brands are part of the Merck group of companies: Calbiochem, Novabiochem, Novagen - today known under the general name Merck Biosciences.

Microsoft Public Company

Microsoft Corp. - this is one of the largest multinational companies producing proprietary software for various kinds of computing equipment - personal computers, game consoles, PDAs, mobile phones and other things, the developer of the most widely used software platform in the world at the moment - the Windows operating system family. The company’s departments also produce a family of Xbox game consoles, as well as accessories for personal computers (keyboards, mice, etc.).

Since 2012, it has been producing its own tablet computer - Surface and its edition of Surface RT. Microsoft products are sold in more than 80 countries, programs are translated into more than 45 languages. The company is headquartered in Redmond, Washington, USA. The staff of the corporation is about 90 thousand people. Since November 1992, a Microsoft representative office has been operating in Russia (since July 2004, Microsoft Rus LLC). Microsoft is under court supervision as a result of the 2002 settlement agreement.

Nike Inc.

Nike Inc. - this is American company, a world famous manufacturer of sportswear and shoes. Headquarters - in the city of Beaverton (Oregon). According to analysts, Nike accounts for almost 95% of the basketball shoe market in the United States. In 2008, the company employed over 30,000 people worldwide. The brand is valued at $ 10.7 billion and is the most valuable brand in the sports industry.

Since September 20, 2013 it has been included in the Dow Jones Industrial Average. Nike is one of the largest sporting goods manufacturers in the world. Products are manufactured under the brands Nike, Air Jordan, Total 90, Nike Golf, Team Starter, etc. Nike also controls companies that produce products under the Converse and Hurley International brands.

Pharmaceutical company Pfizer

Pfizer Inc. - this is American pharmaceutical company, one of the largest in the world. The company produces the world's most popular medicine Lipitor (Atorvastatin, used to lower blood cholesterol). The company also sells the following popular medicines: Lyrics, Diflucan, Zitromax, Viagra, Celebrex, Sermion, Dostinex, Champix. Pfizer shares were included in the Dow Jones Industrial Average calculation base on April 8, 2004.

Headquartered in New York, the main research center is in Groton, Connecticut. The company produces drugs for a wide range of consumers under the well-known brands of Benadryl, Sudafed, Listerine, Desitin, Visine, Ben Gay, Lubriderm, Zantac75 and Cortizone. Pfizer is the inventor and manufacturer of the world famous Viagra. Production of drugs is carried out at the company's factories located in the USA, Great Britain, France, Italy, Holland, Germany, Turkey (in total - in 46 countries of the world).

Procter & Gamble Co.

Procter & Gamble Co. - this is American company, one of the leaders in the global consumer goods market. The company ranks 22nd on the Fortune 500 list and is one of the leading US companies in terms of profit and market capitalization. P&G is the world's largest advertiser, with advertising costs in excess of $ 8 billion. Headquartered in Cincinnati, Ohio. P&G representative office in Russia was opened in 1991, at present the company has opened 4 regional offices and 3 factories. The main Russian office is located in Moscow.

Insurance company Travelers

Travelers is holding insurance company. The company provides a wide range of insurance services for private and corporate clients, as well as non-profit and government organizations. The company provides accident insurance, debt insurance, property insurance and other types of insurance.

UnitedHealth Group Inc.

UnitedHealth Group Inc. - this is diversified healthcare company. The group operates through two companies, UnitedHealthcare and Optum, which provide drugs and healthcare services for private clients and healthcare facilities.

United technologies corporation

United Technologies Corp. - this is one of the largest financial and industrial groups in the United States. Headquarters - in Hartford, Connecticut. UTC includes the following companies: Carrier Corporation is one of the world's leading companies in the production of heating, ventilation, air conditioning, and cooling systems. UTC Aerospace Systems is the merger of Hamilton Sundstrand and Goodrich in 2012. Hamilton Sundstrand is a defense company developing and manufacturing aviation and other military equipment.

Otis is the world's largest manufacturer of elevators, escalators, etc. Pratt & Whitney is a manufacturer of aircraft engines, gas turbines, etc. Sikorsky Aircraft Corporation is a world leader in the design and manufacture of helicopters for commercial, industrial and military needs. The total number of personnel of the holding companies for 2008 is 223.1 thousand people. The total revenue of United Technologies enterprises in 2008 is $ 58.7 billion (in 2007 - $ 54.8 billion), net profit - $ 4.7 billion ($ 4.2 billion). Assets at the end of 2008 - $ 56.5 billion.

Telecommunications company Verizon

Verizon Communications is American telecommunications company, one of the largest in the United States and around the world. Headquarters - in New York. Verizon Communications provides fixed and mobile communications (cdma 800/1900 MHz), satellite broadband Internet access services, as well as information services. In addition, the company owns a large business producing telephone directories. The number of employees in 2005 is 217 thousand people. Revenues in 2006 - $ 88.144 billion (in 2005 - $ 75.1 billion), net profit - $ 6.197 billion ($ 7.4 billion).

Multinational company Visa Inc.

Visa Inc. - this is American multinational payment services company. It is the basis of the association of the same name. Since September 20, 2013, its share price has been involved in the calculation of the Dow Jones Index. The annual trading turnover on Visa cards is 4.8 trillion US dollars. Visa cards are accepted for payment at points of sale in more than 200 countries of the world. The organization plays a central role in the development of innovative payment products and technologies that are used by 21 thousand financial organizations - members of the payment system and their cardholders.

At the beginning of the third millennium, VISA accounted for about 57% of payment cards in the world, the main competitor MasterCard had about 26%, the third American Express system a little more than 13%. The situation changed radically in 2010: of the 8 billion cards in circulation, 29.2% were China UnionPay versus 28.6% Visa, although Visa was still the leader in terms of payments. Today, there are more than 2.011 billion Visa cards in the world as of 02.05.2012, which are accepted for payment in approximately 20 million various institutions around the world.

Retailer Wal-Mart Stores

Wal-Mart Stores Inc. - this is An American retailer operating the world's largest retail chain operating under the Walmart brand name. Headquarters - in Bentonville, Arkansas. The company ranks 1st in the Fortune Global 500 (2012). The leader of global retail Walmart, like last year, tops the global ranking Powers of Retailing 2013, compiled by Deloitte, Wal-Mart accounts for 10% of the total revenue of all participants in the Top 250. Walmart is the world's largest retail chain, which includes (as of 2012) more than 10,130 stores in 27 countries. Among them are both supermarkets and supermarkets selling food and industrial goods.

The network strategy includes such terms as the maximum assortment and the minimum, striving for wholesale prices. Walmart's main competitors in the US retail market are Home Depot, Kroger, Sears Holdings Corporation, Costco, and Target. Walmart is a leader in implementing technologies related to the use of RFID tags in trade.

Conglomerate Walt Disney Co.

Walt Disney Co. - this is one of the largest financial conglomerates of the entertainment industry in the world. Founded on October 16, 1923 by the brothers Walter and Roy Disney as a small animation studio, it is currently one of the largest Hollywood studios, the owner of 11 theme parks and two water parks, as well as several broadcasting networks, including the American Broadcasting Company (Hey BBC).

The headquarters of Walt Disney Company and the main production facilities are concentrated in the Walt Disney Studios (Walt Disney studio) in Burbank, California, USA. Walt Disney Company is part of the Dow Jones Industrial Average. Market capitalization on May 16, 2013 - about 122 billion dollars.

Dow Jones Index Calculation

At the moment, there are powerful computers that can calculate many different indicators. Now you think this method is too simplistic. But at the end of the nineteenth century, this innovation was like a lighthouse, whose light was breaking through a very thick fog. The stock index has become a convenient reference point by which it was possible to compare individual stocks with the general market rate. The index was the reason for talking on the streets. It became a benchmark for comparing the market as a whole with indicators of the economic condition of the market.

The mechanisms of the first indices were dictated by the fact that their calculation had to be done only with paper and pencil. Therefore, the calculation mechanism was simple. It was only necessary to add up the prices, and then divide the amount received by the number of shares. A century has passed, and now little reminds us of that calculation of the index. But the very idea of \u200b\u200busing the index in order to explain the trends of the stock market, as well as its short-term fluctuations, this idea itself is worthy of the highest praise. Without them, there would simply be no current degree of financial democracy: millions of ordinary people would not be able to actively manage their investments now, they would not be able to become large shareholders.

The first index, calculated on July 3, 1884, represented the average price of 11 shares. It is called the Dow Jones Railroad Average, since 9 out of 11 shares were issued by railway companies. By 1896, the Dow introduced an average industrial index, which was defined as the arithmetic average of prices for 12 shares. The index value at the close of the first day was 69.93 points (the total value of the shares included in it at that time was 769.23). In 1928, the number of shares used to calculate the index was increased to 30, which it remains to this day. NYSE (New York Stock Exchange) updates and publishes the DJIA every half an hour throughout the trading day.

In 1928, a change was introduced in the methodology for calculating the index: a special factor was introduced (the current divisor), which was designed to prevent distortion of values \u200b\u200bcaused by stock split, dividend payment, and a change in its listing. The stock index can characterize both the market as a whole and a separate sector of the economy (industry, transport, etc.).

Major Stock Indices

The Dow Jones Industrial Average Index (DJIA) is calculated as the simple average of stock prices for the 30 largest industrial corporations (with the exception of American Express and AT&T, which cannot be considered purely industrial corporations). The shares used in this index are quoted at New York Stock Exchange (NYSE) and make up about 15-20 percent of the total market value of NYSE shares. The composition of the Dow Jones industrial index is not constant: the components of this index may vary depending on the position of the largest industrial corporations in the US economy and the market. Initially, this index was calculated for 12 companies, now - for 30.

At the beginning of its history, the Dow Jones index was calculated as a simple arithmetic average for the stock prices of listed companies. However, periodically, distortions of the index values \u200b\u200boccurred due to the fact that the Dow Jones index is not weighted by the number of shares traded on the market. Therefore, from September 10, 1928, the "method for calculating the constant divisor" was adopted.

And now, the Dow Jones Industrial Average is calculated by adding up the prices of the shares included in it at the time of closing the exchange and dividing the amount received by the “permanent divider”, which is adjusted by the fractionation of shares and dividends in the form of shares that make up more than 10 percent of the market value of the issues, and also the replacement of the components included in the listing, their mergers and acquisitions. It is also worth paying attention to the growth rate of the index. The index crossed the first 1000th threshold only in 1972, that is, in 88 years! While over the past two years it has risen by about 2000 points. The following is a simplified diagram of the use of the constant divider method.

Dow Jones Index - record holder

Suppose the index covers only three shares with the following prices at the end of the exchange day: share A - 30, share B - 25, share C - 45, 100 \u003d 33.33 - index at the end of the exchange day. The next day, it is advisable to split the share C (3: 1), the price of which at the time of closing the exchange is 20. The prices of shares A and B are 35 and 30, respectively. By dividing according to the old method using divider 3, we get a result of 28.33 at the end of the exchange day, which is not true, since market prices did not fall, but rather increased. Therefore, to eliminate distortion, the divider should be changed. To find the corresponding indicator, we follow the progress of calculations related to the previous day in the above example, taking into account the splitting of stock C: stock A - 30, stock B - 25, stock C - 15 (3: 1 split). Dividing the amount by the old index 33.33, we get a new constant divisor - 2.10.

Now we calculate the index for the next day: stock A - 35, stock B - 30, stock C - 20, 85 \u003d 40.48 - index at the end of the exchange day. Stock A - 30, stock B - 25, stock C - 45, 100 \u003d 33.33 - index at the end of the trading day. It should be noted that this method “punishes” the least weighted shares in the new index, while the price of these shares in the old index was the highest; nevertheless, it can be assumed that C shares are leading the market, and this is evidenced by the scheme of their fragmentation and a significant increase in price. If the multiplier method were used to eliminate the distortion, then C shares would still occupy a leading place: stock A - 35, stock B - 30, stock C - 60, 125 \u003d 41.67, index at the end of the exchange day.

The constant index should also be changed if dividends on shares, splitting or replacing one type of securities with another lead to tangible distortions of the index. The divider should not be changed in cases where the splitting of shares, dividends on shares, or the replacement of one type of securities with others cause deviations of less than five points in the index of shares of industrial companies, less than two points in the index of shares of transport (formerly railway ) companies and less than one point in the stock index of utility companies.

The dynamics of US stock markets

Factors Affecting the Dow Jones

Like many stock indicators (DAX, Nikkei) Dow Jones is weighted value. No wonder that it is subject to mergers, acquisitions, additional issues of shares and so on. The current version of Dow Jones is not the arithmetic mean of stock prices. Although initially it was just that. This is the sum of all component stock prices divided by the denominator. What is the denominator? Imagine a float that fluctuates due to every rustle. However, then it is aligned anyway and comes to a vertical position. The denominator in the case of the Dow Jones performs a similar function. As a variable, it depends on corporate events.

This is necessary so that inaccuracies and distortions do not arise in the calculations, and the Dow Jones index retains its comparability with previous periods. Along with the NASDAQ Composite and S&P 500, the Dow Jones index most fully reflects the state of the US economy. Hence its dependence on some international news: natural disasters, terrorism, economic communications. Dow Jones allows investors and analysts to assess the market situation on the basis of a single value. The convenience of the Dow Jones index is that you can monitor the situation without focusing on individual companies.

Dow Jones Index Dynamics

The Dow Jones Index reached its highest point - 381.17 - October 3, 1928, and the lowest point - 63.90 - December 15, 1921, October 28, 1929 The Dow Jones Index fell sharply, as did the market as a whole. The stock index of industrial enterprises fell by almost 40 and another 30 points on the 29th, amounting to 230.07, which corresponded to a 40 percent drop in the annual level. On July 8, 1932, the Dow Jones Index hit a record low of 41.22. In 1987, the Dow index fell by 508 points, or by 22.6%, and amounted to October 19, 1738.74, which was the most shocking stock market in history. Investor losses are estimated at over $ 500 billion. The volume of trading on the New York Stock Exchange amounted to 604,330 thousand shares.

October 19, 1987. The stock market was gripped by a crisis. In less than seven hours, the Dow Jones Industrial Average fell 508 points, or 23%, which meant a $ 503 billion reduction in securities transactions on the exchange. Within two months, exchange transactions fell by $ 1 trillion, which corresponded to 984 points of the Dow index, or 36%. The computers of the New York Stock Exchange were overloaded, since 604 million shares participated in the auction. On August 24, 1989, the Dow index, which amounted to 2734.64 points at the end of the trading day, broke its old record - 2722.42 of August 28, 1987.

Sources and links

Sources of texts, pictures and videos

en.wikipedia.org - Free Encyclopedia Wikipedia

minfin.com.ua - information and analytical portal of economic subjects

dowjones.com - official site of Dow Jones & Company

dowjonesfactiva.ru - Dow Jones website in Russia

bloomberg.com - Bloomberg news agency

rbcdaily.ru - RBC business magazine website

economics.unian.net - Ukrainian news agency Unian

djindexes.com - Dow Jones Index Analytics

quote.rbc.ru - stock market analysis, price forecast

shkolazhizni.ru - the electronic portal of the School of Life magazine

bmfn.com.ua - information portal about the forex market

forex-investor.net - automatic advisers and forex strategies

groshi.ua - a site about the world's money

fortrader.ru - forex magazine for traders

ftn-trader.chat.ru - website about the forex market

timesnet.ru - an electronic magazine about business in Russia and the world

ereport.ru - site about the global economy

daytrader.com.ua - portal for trading in the stock market

finanz.ru - stock market news

daytrader.ua - website of the Daytrader dealing center

indexfond.ru - stock index website

forex-m.com - website of the Forex-Market dealing center

Sources of Internet Services

forexaw.com - information and analytical portal for financial markets

wordstat.yandex.ru - a service that allows you to analyze search queries

Google.ru - a popular search engine

translate.google.com - translator from google search engine

maps.google.com - Google search engine maps

yandex.ru - the largest search engine in the Russian Federation

ru.tradingeconomics.com - website of economic indicators

Application Links

getpaint.net - free image software

windows.microsoft.com - the site of Microsoft Corporation that created the Windows OS

office.microsoft.com - website of the corporation that created Microsoft Office

chrome.google.com - a frequently used browser for working with sites

The Dow Jones Industrial Average or DJIA is one of the stock indices created by the Wall Street Journal and one of the founders of the Dow Jones & Company, Charles Dow.

The index was first calculated on May 26, 1896. Today it is owned by S&P Dow Jones Indices, most of which is owned by McGraw-Hill Financial.

The Dow Jones Industrial Average is just one of the indices created by Charles Dow. Today, the US Dow Jones Index includes the 30 largest companies operating in the United States.

The presence of the word index in the name of the index is for the most part a historical trace, since today the modern 30 companies included in the index do not belong to what is traditionally considered heavy industry.

The word average, which translates from of English language, as “average, averaged”, does not quite correctly reflect the essence. The Dow Jones Index does not show average prices, but an amount divided by a divider that changes every time splits or dividend payments are made in shares.

What is the Dow Jones Industrial Average?

Calculation DJIA based on stock prices, not on. The Dow Jones Index is independent of the number of shares issued.

Few really understand what the Dow Jones index shows. What does the news mean, like the DJIA lost 120.23 points and closed at 16,955.59, or did the Dow Jones reach 17,138.20? First you need to understand what the quote 16,955.59 or 17,138.20 reflects.

For a better understanding, let's first take a look at the costing process. Back in 1896, Charles Dow added up the stock prices of 12 companies and divided by 12. Later in 1923, Arthur “Pop” Harris was appointed to calculate these values. After his retirement, computers began to be used to calculate the index.

Today, the process is significantly different from what Mr. Dow did before. To use historical data, a special divider was invented. Over the past 118 years, the index has experienced a lot of splits, company divisions, and other things that could greatly distort the index if the constantly changing divider were not used.

Let's look at an example. The total amount of prices after the close of trading on July 25, 2014 for 30 shares included in the index amounted to 2,641.03. The divider for that day is 0.15571590501117 (DJIA Divisor, it is published every day in the Wall Street Journal). If you divide the sum of closing prices by a divider, you get 16,960.57. This is the value of the Dow Jones index at the close of trading on July 25.

Obviously, a change in the price of any of the 30 shares will necessarily affect the value of the Dow Jones index.

The Dow Jones American Index is a simple weighted average of the sum of stock prices on a list. It is permissible to consider the value of the index as prices. If the quotes of the index fell to close by 80 points, then stock prices began to cost in the amount of $ 80 dollars cheaper (given the divider).

An increase in the value of the index indicates an increase in prices for the corresponding shares and vice versa. It is important to understand that a significant increase in the quotes of the index can be caused by an increase in prices for shares of one company only. The growth of some securities may outweigh the fall of the rest.

That is, if you have stocks included in the Dow Jones index in your portfolio, then increasing it does not mean that your assets have grown in value. The index shows a weighted average of 30 companies at once.

Over a 100-year history, the Dow Jones Index has become one of the most popular and today is considered as the main barometer of the state of the American stock market.

DJIA, of course, also has disadvantages. Firstly, the calculation method does not take into account the size of companies. Secondly, the 30 companies included in the index of companies represent only a small fraction of the huge US stock market, where 10,000 companies are listed.

Despite the flaws, the index remains the most popular. When the news says that the Dow Jones index showed record growth, then the stock market is (on average) is on the rise.

Dow Jones Index Companies

The list of companies included in the Dow Jones Index is constantly changing. Rarely, but constantly. Some firms have been in the index many times, giant corporations generally do not leave it for many years.

There are many places on the Internet that allow you to get acquainted with the current list of companies. For example, in a fairly convenient form, you can see on the CNN website or on the official website of the Dow Jones index in the corresponding section.

What does the Dow Jones Index mean and what does it threaten

The fall of the Dow Jones index can be triggered by a decrease in the price of shares of one company or all at once. For a fall in prices for some securities to entail a fall in the index as a whole, a really significant change in price must occur.

However, a really strong drop in the Dow Jones Index usually occurs when prices fall on most of the stock list. Such events are called a “collapse."

Investors usually choose companies to invest in after evaluating the business. They prefer to invest in firms that show good returns and have good potential for future development.

If companies publish “bad” financial statements, then investors begin to get rid of such papers. This is not always the case with extremely negative financial indicators. For example, Apple shares have significantly “sank” since the last presentation, because investors did not see anything fundamentally new among the presented products. There are many factors that influence stock market pricing.

The Dow Jones Index may fall under the influence of a general weakening economy. The reason for the fall is sometimes the decline in oil prices, economic crises (in the USA and China due to the strong dependence of the economies of the two countries), natural disasters and other global fundamental factors.

Since companies from various industries are present in the Dow Jones index, financial analysts see it as a unique indicator of the general state of the US economy. When the DJIA is slightly sagging, investors tend to buy stocks, because they believe that prices will soon return to their previous values \u200b\u200band make good money.

A significant drop in the Dow Jones Index, on the other hand, will be seen as a very negative factor. When a severe collapse occurs, investors start to get rid of stocks in a panic. Moreover, the word panic is very appropriate here, since inexperienced investors and traders do not even try to understand the reasons for the fall.

A significant drop in the Dow Jones index in the USA has a rather strong psychological effect on society. People begin to save and be more careful about their savings. As a result, demand for various goods falls, unemployment rises, and the country's overall productivity decreases.

How does the Dow Jones Index affect the dollar

The Dow Jones Index has become so popular in the world that recent decades is considered the main indicator of the state of the US economy.

The dollar against the euro is almost one in one correlates with the Dow Jones index. Falling quotes of the index may lead to a fall in the dollar. But there is an inverse relationship. The growth of the dollar may lead to higher prices for stocks included in the Dow Jones.

Name Dow jones has become synonymous with the stock market and the US economy. One of the most popular and important stock indices is the Dow Jones Index.

Dow jones

In 1883 Charles Dow (1851–1902) and Edward Jones (1856–1920) began publishing a two-page newspaper with data on the financial markets of America.

This was the beginning of the well-known edition of the Wall Street Journal.

At that time, it was the first newspaper to publish daily stock summaries, and it immediately became very popular.

Since the newspaper published data that were known only to not many, now everyone could evaluate the strengths of competitors. In order not to disclose all the information about the companies, Dow and Jones were forced to introduce a new indicator that reflected the average cost of the ten largest industrial companies. This was the first dow Jones Index.

Now the index contains the 30 largest companies:

• 3M Co.(NYSE: MMM) (industrial conglomerate)
  American express Co. (NYSE: AXP) (credit services)
  AT&T (NYSE: T) (telecommunications)
  Boeing Co., The (NYSE: BA) (aircraft and defense)
  Caterpillar, Inc.(NYSE: CAT) (agricultural and construction equipment)
  Cisco systis (NASDAQ: CSCO) (telecommunications)
  Chevron Corp.(NYSE: CVX) (oil and gas company)
  Coca-Cola Co. (NYSE: KO) (drinks)
  E.I. du Pont de Niours & Co. (NYSE: DD) (chemistry)
  Exxon Mobil Corp. (NYSE: XOM) (oil and gas company)
  General Electric Co. (NYSE: GE) (industrial conglomerate)
  The Goldman Sachs Group, Inc. (NYSE: GS)
  Home Depot, Inc. (NYSE: HD) (building supplies stores)
  Intel Corp. (NASDAQ: INTC) (semiconductors)
  International Business Machines Corp. (NYSE: IBM) (computing)
  JPMorgan Chase and Co. (NYSE: JPM) (financial group)
  Johnson & Johnson Inc. (NYSE: JNJ) (chemistry, pharmaceuticals)
  McDonald’s Corp. (NYSE: MCD) (fast food restaurants)
  Merck & Co., Inc. (NYSE: MRK) (pharmaceuticals)
  Microsoft Corp. (NASDAQ: MSFT) (software)
  Nike Inc. (NYSE: NKE)
  Pfizer, Inc. (NYSE: PFE) (pharmaceuticals)
  Procter & Gamble Co. (NYSE: PG) (household chemicals)
  Travelers (NYSE: TRV) (insurance)
  UnitedHealth Group Inc (NYSE: UNH) (health care)
  United Technologies Corp. (NYSE: UTX) (industrial conglomerate)
  Verizon communications (NYSE: VZ) (telecommunications)
  Visa, Inc. (NYSE: V)
  Wal-Mart Stores, Inc. (NYSE: WMT) (distribution network)
  Walt Disney Co., The (NYSE: DIS) (entertainment industry)

Dow Jones Industrial Average Index (DJIA) - indicates the activity of the American Stock Exchange and the economy, as the industrial sector is the richest.

The DJIA distribution is as follows:

• Industry: 20.41%
• Consumer services: 16.36%
• Technology: 15.58%
• Health: 11.45%
• Financial: 11.13%
• Oil and Gas: 10.92%
• Consumer goods: 6.16%
• Telecommunications: 4.73%
• Main materials: 3.26%

One of the significant drawbacks of the Dow Jones index is the way it is calculated - when calculating the index, the prices of the shares included in it are added up and then divided by a correction factor. As a result, even if one company is noticeably less in terms of capitalization than another, but the value of one of its shares is higher, then it has a stronger effect on the index.

All this is necessary to know for a full understanding of the Dow Jones index, because now you know what the index depends on more and what can affect the change in its price.

How to make money on the Dow Jones Index

One side dow Jones Index easy to analytics, as there are a lot of news on the index. For example, many exchange participants work only with this index, making dozens of transactions per day.

But on the other hand, it is very difficult to analyze the index, since it is not always possible to keep track of everything. In addition, the index price is affected not only by the companies included in its composition, but also the global economy and politics.

For instance , whenthe Dow Jones index reached an intraday high of 5 months, thanks to news from Russia. According to the Secretary of the Russian Security Council, Russia will continue to act as a mediator between Kiev and South-East of Ukraine and make efforts to de-escalate the conflict.

As you can see, the news is completely unrelated to other companies in the index, but it has affected the US economy, political stability and the Dow Jones index as an indicator of the US economy.

To make money on the Dow Jones index, it is important to understand that this index has become the personification of Wall Street and the American economy as a whole.

In the economic calendar, you need to keep track of US industrial data, the most important economic indicators with a high degree of importance.

You can use the forecasts in which the index is named USA 30 - This index name is quite common on some exchanges.

On the page Marketwatch (//www.marketwatch.com/investing/index/djia/news) you can view the latest news regarding the index.

As you can see, technical analysis here does not always help, since the price of the index directly depends on the economic and political situation in the world. News is published quite often, and the index follows world events. Personally, I’m not sure that indicators or other technical analysis tools are able to accurately predict the price. maybe I'm wrong, but it seems to me that the fundamental analysis in this case will be more reliable in the long run.

Where to make money on the Dow Jones Index

You need to determine whether the price will rise or fall in the specified period, for example, in the next 20 minutes. Indicate the term of the option, the amount of the investment and indicate your forecast.

• If you think that the price will rise - choose an option UP;
• If you think that the price will fall - choose an option DOWN.

If your forecast is correct - you will receive 70-85% profit, even if the price changes at least 0.001 points in the direction of your forecast.

Opening I chose an asset - dow Jones Index:

I set the end time of the option to 18:10 , the option closes after 16 minutes:

The graph shows that now 17:54 , so I need to make a price forecast for 16 minutes. Based on and technical analysis, I invested with a price increase condition - button UP:

Soon, I returned to the broker's website and saw the result:

For 16 minutes, the Dow Jones index brought me $ 42.9 in net profit!

With an investment of $ 55, I returned $ 97.9:

Broker allows you to earn on shares of leading companies from around the world, commodities as

Investing in the Dow Jones Index

Dow Jones Index: what is it and how to invest in it

The expression "Dow Jones Index" is familiar even to those who are far from exchange trading. It is often found in films and news bulletins. Last year in May marks 120 years since the values \u200b\u200bof this index began to be regularly published in stock exchange reports. Especially for lazy investors, today we will analyze the Dow Jones index: what it is and how to use it in your investment portfolio.

A brief history of the index

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The full name of the index sounds like the Dow Jones Industrial Average. It is a number based on stock prices of 30 major US industrial companies, taking into account correction factors. Initially, the calculation was made by dividing the sum of stock prices by the number of companies (in the very first version of the index there were only 11). As stocks rise in price, they are split up with the goal of adjusting to a specific price range. Accordingly, the divisor in the formula for calculating the index has long been not equal to 30, and from time to time it is adjusted taking into account the fragmentation of the next stock. This approach has long been criticized by experts. They argue that the weights of companies in the index are not equivalent.

The history of the Dow Jones Index began in 1884. Then Charles Dow, editor of economic news in the Wall Street Journal, published by the Dow Jones & Company, compiled the first version of the index, which included 11 railway companies and only 2 manufacturing companies. At first, C. Dow used this index solely for research purposes. The first publication of the index took place on May 26, 1896. By that time, its composition was completely revised and included the shares of 12 manufacturing companies.

The abbreviated name of the index was DJI. Of the companies that were at that time in its composition, in the current version of the index, only one remained: General Electric. From time to time, some companies drop out of the list and others take their place, whose share in the corresponding market becomes larger than that of the retired. For the first time, the number of companies in the calculation of the index reached 30 only on October 1, 1928, and since then has remained unchanged.

The very first published index value was 40.94. The milestone of 1000 points was first achieved in 1972. 03/29/1999 for the first time the value of 10,000 was submitted. The maximum (at the moment) value of the Dow Jones in the entire history was noted quite recently on 03/01/2017 and is equal to 21169.11. But there were moments of dramatic falls in the history of the index. The strongest daily drop was recorded on the famous "Black Monday" 10/19/1987 - 22.6%. In addition to the United States, comparable scales of the collapse of stock indices almost simultaneously occurred in most developed countries. There have been many attempts to explain this phenomenon, but not one version stands up to criticism. The world economy did not show obvious signs of overheating; there were no natural or man-made disasters that day. This case, a wonderful illustration of what is commonly called the “black swan” (as Lebanese economist Nassim Taleb put it), is an event that cannot be predicted, but has huge devastating consequences. The table summarizes all cases of significant (more than 20%) drops in the DJIA index relative to its previous values:

These data end in 2015, but since then there have been no serious corrections in the market. You can see the current value and composition of the Dow Jones index online, for example, here: marketwatch.com/investing/index/djia.

Dow Jones Investment Options

The importance of industrial and industry indices is not limited to the scope of economic research and the preparation of business plans of large corporations. Much attention is paid to the dynamics of the indices by investment funds and private investors in compiling their portfolios. A popular view is just based on those included in the structure of a particular index. At the same time, it will not be possible to achieve maximum market returns, but the risk is proportionally reduced, since the index contains the largest and most reliable issuers. IN long term (10 years or more) investing in indices clearly outperforms and.

From the point of view of practical implementation, there are 3 main types of investment in the industrial index:

• Purchase of shares of all companies that make up the index;
• Purchasing an index futures;
• Purchase of a contract for difference (CFD);
• Buying shares in an ETF fund investing in an index;

Consider the pros and cons of each option.

The inconvenience associated with stocks is obvious: these are large expenses for the formation of the portfolio, and the need to monitor the composition of the index for the rapid replacement of retired companies with new ones, and the time it takes to sell the portfolio, if necessary, take profits or go into higher-yield assets. But, along with the shortcomings, this type of investment has a great advantage: in contrast to the index, stocks. Let us compare the return on investment in the value of the DJIA index and in the stocks composing it at different stages of the history of companies.

Thus, investing in stocks shows an average annual return of almost 2 times higher, which for the whole period is summed up in astronomical figures. But to obtain effective profitability, you need to consider. Here's what the stock index returns look like with this amendment.

Investing in futures for the Dow Jones Index is associated with high costs and for this reason is available almost exclusively for professional investors. Currently, the Chicago Board of Trade (Chicago Board of Trade) is trading the $ 5 Mini Dow and the Big Big $ 25 Dow. The cost of contracts is calculated based on $ 5 or $ 25, respectively, per 1 point of the index value, i.e. at the moment, even for the "small" futures exceeds $ 100,000. However, for short-term transactions, you can do with a relatively small amount, because it’s not delivery, but settlement futures. When you open a long position, the trader makes a profit proportional to the growth of the index, and when you open a short one, it is proportional to its decrease.

Russian brokers provide extremely limited access to trading on the Chicago stock exchange, and the above futures do not apply to available instruments. As an option, you can resort to the services of the Russian representative office of the American broker AMP Global Clearing LLC (amprus.ru). To make a deal with a “small” futures you must have at least $ 4,790 on your account. This amount consists of the minimum margin requirements (for this contract they are equal to $ 4290) and the daily margin, which gives the right to make an intraday transaction ($ 500). But the investor does not trade within the day, which means that he will have to transfer the open position to another day.

In this case, the night margin of $ 3300 comes into effect. If the index decreases by 660 points, the position will be forced. But in the history there have been drops in the index much more serious. With these considerations in mind, a large margin of safety should be laid in the invested amount, which is not available for every investor. Moreover, a fixed fee of $ 85 is charged for access to exchange trading, a commission for withdrawing funds from an account is $ 30, etc. Among foreign brokers there are those who offer less stringent conditions for trading futures on the DJIA. For example, the British IG Group Ltd ($ 2 per point, the minimum margin is 0.5% of the contract value). However, this broker does not have a representative office in Russia.

The easiest and most affordable option for investing in DJIA is to use the services of forex brokers to purchase a contract for difference (CFD, Contract for Difference). Usually, this means profit due to changes in the price of an asset between opening and closing a position. Some brokers allow you to work with this tool, having literally several dollars in the account, for example, Amarkets (see my

There is an exchange saying: "America is sneezing, and the whole world is catching a cold." But how to understand what exactly is happening with largest economy planet, the state of which is closely monitored by almost all traders in the world?

Indicators of the "health" of economic processes are stock indices. As for the United States, these are the S & P500 indexes (which tracks the dynamics of the 500 largest companies), the NASDAQ Composite index (the index of high-tech companies), and the Dow Jones, the oldest and most famous index of all, a barometer of American development. Even people unfamiliar with the exchange world have at least heard something about this index, and even traders are familiar with it firsthand. In this article we will tell in simple words, what is the Dow Jones index, what does it affect, what is measured and what does it depend on.

Dow Jones Index History

The Dow Jones Index, or rather, the Dow Jones Industrial Average, was developed by Charles Dow, the founder of The Wall Street Journal and the progenitor of the Dow theory. The Dow Jones Index dates back to 1884, and it was not originally published, but used for “private use”, and included 11 shares (9 railway and 2 industrial).

Charles Dow believed that the index should confirm the dynamics of the stock. That is, the Dow Jones index shows whether the stock will continue to grow in the future or not. If the stock is growing and the index too - stock growth is likely to continue. If the stock grows, and the index begins to decline, it is more likely to decline in the future. The “public” version of the index appeared on May 26, 1896 and was already called industrial (at that time the main capital-intensive companies were industrial). The index included stocks of 12 companies in its basket, and was calculated as the arithmetic average of the prices of these stocks. Its first value is 40.94 p.

Dow Jones Index Family

Today, the Dow Jones index, or rather, the Dow Jones index family, is calculated by the rating agency Standard and Poor’s (the modern name after the rebranding of S&P Global). This organization is engaged in assigning long-term and short-term ratings to countries, issuers and individual issues of debt securities in 26 countries of the world, as well as providing investors with various market research. Dow Jones family indices calculate not only the dynamics of stocks, but also, for example, Dow Jones Real Estate. However, traditionally, referring to the Dow Jones indices, we are talking about the stock market.

The Dow Jones family of stock indexes includes:

Dow Jones Industrial Average - the main representative of the family (30 shares)
. Dow Jones Industrial Average Yield Weighted - a similar index, weighted by dividend yield,
. Dow Jones Transportation Average - index of transport companies (20 shares)
. Dow Jones Utility Average - Utility Companies Index (15 stocks)
. Dow Jones Composite Average - an index that unites this family. Includes industrial, transport and utilities indices - 65 shares.

In addition to American companies and tracking their dynamics, the Dow Jones also tracks global trends using the Dow Jones Titans family indices: Dow Jones Global Titans 50 (the main “world” index), Dow Jones Turkey Titans 20, Dow Jones Italy Titans 30, Dow Jones South Korea Titans 30, Dow Jones Africa Titans 50 and Dow Jones Safe Pakistan Titans 15. Each of them tracks the dynamics of the number of shares of the largest companies in the respective regions indicated in the name.

Let's talk more about the most famous and tracked index - the Dow Jones Industrial Average. This index is calculated using the Price Weighted method, not only in US dollars, but also in EUR, CAD and JPY. The index calculation base includes 30 shares of the largest companies (S & P500, for example, includes 505 shares of 500 companies). And the name “Industrial Average” is more likely a tribute to history, since several sectors with weights are presented in the index at once.

The total capitalization of the companies represented in the index is $ 5,695,582.30 million. The weight of the main heavyweight in the index is 5.4%, and the TOP-10 is 44.4%. As for the average fundamental indicators of companies from the calculation base, they are as follows: P / E - 19.75, P / B - 3.34, dividend yield - 2.49%, P / S - 1.95, P / Cash flow - 11.53.

For those who want to get index returns on the NYSE, ETF SPDR Dow Jones Industrial Average ETF Trust (DIA ticker) is traded, the average transaction volume of which is about 5 million (price - about $ 200, amount in the lot - 5). Also, the Dow Jones Industrial Average index trades in CME futures contracts, the most liquid of which are mini-contracts (E-mini). But in terms of turnover, the futures on the E-mini S & P500 firmly hold the championship - 1.5 million against 138 thousand for mini Dow Jones.

Fig. 2. Volumes of transactions on the E-mini Dow Jones Industrial Average at CME

As for the global counterpart of the Dow family - the Dow Jones Global Titans index - Russia takes 16th place in it - 0.7% of the total weight with $ 58,532.78 million for the capitalization of incoming companies. Our country is on this list immediately after South Korea, which has a similar weight indicator, but with a capitalization of $ 238 843.19 million. ETF SPDR Global Dow (DGT ticker) is traded for this index on the NYSE, but its turnover is much less and averages about 5 thousand (the price is around $ 70, the number in the lot is 200).

Fig. 3. Dow Jones Global Titans Country Composition

Output

Despite its rich history, the Dow Jones index is somewhat less popular with traders than other key stock indexes. However, you need to understand what the Dow Jones index means, and also track it - it can give more sensitive signals (due to the large value of 20 thousand pp against 2 thousand in SnP500).

In this article, we briefly described what the Dow Jones index number means. Want to get more information on this topic? Register on the Otkritie Broker portal - we’ll tell you how to work with indices and earn money using their signals!