The Dow Jones Industrial Average Index

The Dow Jones Industrial Average Index

Brief History

Founders

Edward Davis Charles Henry Charles Milford

Jones Dow Bergstresser

Brief History

• First DJIA released on May 26, 1896– Stock market was not highly regarded

– Prudent investors bought bonds

The Index brought about a great change in the way people regarded the stock market.

Brief History

• Index designed for everyday people to be able to discern stock trends

Like placing sticks in the beach sand wave after waveTo determine whether the tide is coming in or going out

Higher peaks and higher lows = Bull marketLower peaks and lower lows = Bear market

Brief History

• Daily publication in The Wall Street Journal began on Oct. 7, 1896

• Now, the DJIA consists of 30 stocks accounting for approximately 23.8% of the total U.S.

Company Structure

Dow Jones & Company is a subsidiary of

News Corporation

–7,000+ full-time employees

–Composed of 4 segments

Company’s Four segments

• Consumer Media Group: The Wall Street Journal, Barron's, MarketWatch and the Far Eastern Economic Review.

• Enterprise Media Group: Dow Jones Indexes, Dow Jones Financial Information services.

• Local Media Group: coast-to-coast group which publishes eight daily and 14 weekly community newspapers.

• Strategic Alliances: Smart Money, Vedomosti, Stoxx

Why is the DJIA so reliable?

• A stock is added only if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the sector(s) covered by the average

• Maintained and reviewed by editors of The Wall Street Journal

• Most quoted market indicator in newspapers, on TV and on the Internet

• Discernable by most people• Reliably indicates the market's basic trend

Index Computation

• Average stock price of the 30 companies in the index

Index Computation

Major problem: Splits

Stock trading at $100 has a 2-for-1 split

- # number of its shares doubles

- Price of each share becomes $50

Brings down the average even though there is no fundamental change in the stock

Index Computation

Solution

Prices of the 30 stocks that make up the index are added

Then divided by the Dow divisor, which is constantly modified

Where to find it?

.DJI

Where to find DJIA Quotes

.DJI

Times Square New York, NY

Quiz

Name 2 of the 3 founders of the DJIA

Founders

Edward Davis Charles Henry Charles Milford

Jones Dow Bergstresser

Quiz

What does the DJIA indicate?

DJIA Indicates

Quiz

Who publishes the index?

Published by

Quiz

1.How many companies are represented by the index?

2. Can anyone name 3 of these companies?

30 Companies

MMM 3M Co. HD Home Depot Inc.AA Alcoa Inc. HON Honeywell International MO Altria Group Inc. INTC Intel Corp.AXP American Express Co. JNJ Johnson & JohnsonT AT&T Inc. JPM JPMorgan Chase & Co.BA Boeing Co. MCD McDonald's Corp.CAT Caterpillar Inc. MRK Merck & Co. Inc.C Citigroup Inc. MSFT Microsoft Corp.KO Coca-Cola Co. PFE Pfizer Inc.DD E.I. DuPont de Nemours PG Procter & Gamble Co.XOM Exxon Mobil Corp. UTX United Technologies

Corp.GE General Electric Co. VZ Verizon Communications GM General Motors Corp. WMT Wal-Mart Stores Inc.HPQ Hewlett-Packard Co. DIS Walt Disney Co.IBM International Business Machines CorpAIG American International Group Inc.

Quiz

What is the 3 letter ticker of the index?

Name 3 different places where you can get a quote.

DJIA Quotes

.DJI

QUIZ

What was the .DJI quote at market close today?

Are we in a bull or bear market?

Market pulse

Recession = evil = BEAR

Market is in a downtrend