Greetings,
distinguished listener, this is Joshua Hwang presenting another 90 Seconds to
Culture podcast
News
reports are always covering the Dow Jones. Especially now, “The Dow Jones is
down a record 777 points” What is the Dow Jones exactly? And how is the Dow
Jones determined?
Formally
called the Dow Jones Industrial Average, more commonly referred to as the Dow
30, the Dow Jones or just The Dow, the Dow Jones is not just the stock price of
one company but instead the average of 30 stocks from the largest US companies
and is designed to track the performance of the US stock market.
The Dow Jones Industrial Average started as the average of 12 industrial
stocks, in 1896, and was calculated simply by taking the price of each of the
12 stocks, adding them together and dividing it by 12.
Later stocks were added and removed bringing the total number of stocks
to 30, although General Electric, one of the original 12, is still on the Dow
today. The current Dow Jones Industrial Average is no longer so “industrial”,
but instead reflects leaders of today’s economy. For example: Microsoft and
Coca-Cola. All of which are chosen by the editors of the Wall Street Journal.
Some argue
that the Dow Jones is not a good indicator of the US stock market because of
its price-weighting or because it reflects only 30 of the best stocks.
However, historically it has tracked the performance of the market nicely, thus
it is still used today.