Subject: Stocks - The Dow Jones Industrial Average
Last-Revised: 19 Aug 2007
Contributed-By: Norbert Schlenker, Chris Lott (contact me)
The Dow Jones averages are computed by summing the prices of the stocks in the average and then dividing by a constant called the "divisor". The divisor for the Dow Jones Industrial Average (DJIA) is adjusted periodically to reflect splits in the stocks making up the average. The divisor was originally 30 but has been reduced over the years to a value far less than one. The current value of the divisor is about 0.123; the precise value is published in the Wall Street Journal and Barron's (also see the links at the bottom of this article).
According to Dow Jones, the industrial average started out with 12 stocks in 1896. For all of you trivia buffs out there, those original stocks and their fates are as follows: American Cotton Oil (traces remain in CPC International), American Sugar (eventually became Amstar Holdings), American Tobacco (killed by antitrust action in 1911), Chicago Gas (absorbed by Peoples Gas), Distilling and Cattle Feeding (evolved into Quantum Chemical), General Electric (the only survivor), Laclede Gas (now Laclede Group but not in the index), National Lead (now NL Industries but not in the index), North American (group of utilities broken up in 1940s), Tennesee Coal and Iron (gobbled up by U.S. Steel), U.S. Leather preferred (vanished around 1952), and U.S. Rubber (became Uniroyal, in turn bought by Michelin). The number of stocks was increased to 20 in 1916. The 30-stock average made its debut in 1928, and the number has remained
Here are some of the recent changes.
- On 17 March 1997, Hewlett-Packard, Johnson & Johnson, Travelers Group, and Wal-Mart joined the average, replacing Bethlehem Steel, Texaco, Westinghouse Electric and Woolworth.
- In 1998, Travelers Group merged with CitiBank, and the new entity, CitiGroup, replaced the Travelers Group.
- On 1 November 1999, Home Depot, Intel, Microsoft, and SBC Communications joined the average, replacing Union Carbide, Goodyear Tire & Rubber, Sears, and Chevron.
- Between 1999 and 2004, several stocks in the index merged and/or changed names: Exxon became Exxon-Mobil after their merger; Allied-Signal merged with Honeywell and kept the Honeywell name; JP Morgan became JP Morgan Chase after their merger; Minnesota Mining and Manufacturing offically became 3M Corp; and Philip Morris renamed itself Altria.
- On 8 April 2004, American International Group, Pfizer, and Verizon joined the average, replacing AT&T, Eastman Kodak, and International Paper.
- In 2007 SBC renamed itself to AT&T after completing the acquisition of that company.
The Dow Jones Industrial Average is computed from the following 30 stocks. The links on the ticker symbols will take you to the a page at Yahoo that offers current quotes and charts, and the links on the names will take you to the respective company's home page.
Here are a few resources about the DJIA:
- Dow Jones Indexes develops, maintains, and licenses over 3,000
market indexes for investment products.
- The current list of companies in the DJIA and their weightings.
- Frequently Asked Questions about the DJIA.
- The Chicago Board of Trade's page about the Dow Divisor.
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