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Home / World / You've probably heard the term, "Dow Jones Industrial Average", but what is it?

You've probably heard the term, "Dow Jones Industrial Average", but what is it?

Answer:

An index of 30 industry-leading stocks

"Wall Street Journal" editor Charles Dow developed the stock index in 1896 to provide a simple measurement of how the stock market was performing. His initial index consisted of twelve stocks; it now consists of 30 stocks, with General Electric being the only stock remaining from the initial group. The index was initially computed by adding up the prices of the twelve stocks and dividing the sum by twelve - a true "average". It's a little more complicated these days, as the divisor is manipulated to take into consideration stock splits, spinoffs and stock substitutions, for example, which need to be adjusted to keep the historical continuity of the calculation. The "Wall Street Journal" is responsible for maintaining the index - they replace companies when necessary due to changes in the economy or technology.

World Added November 15th, 2019 by Kristiano Profile Picture Kristiano

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