Dow

Definition

The Dow, short for Dow Jones Industrial Average (DJIA), is a stock market index that measures the stock performance of 30 large, publicly-owned companies in the United States. It is often used as an indicator of the overall health of the U.S. economy and financial markets.

5 Must Know Facts For Your Next Test

1. It includes companies from various industries except transportation and utilities, which are covered by separate indices.
2. The DJIA was created by Charles Dow and Edward Jones in 1896.
3. Unlike other indices that are weighted by market capitalization, the DJIA is price-weighted, meaning stocks with higher prices have more influence on the index's movement.
4. The index is reviewed periodically to ensure it represents the broader economy accurately; companies can be added or removed based on certain criteria.
5. While it only tracks 30 stocks, it is still considered a strong indicator of market trends and investor sentiment.

Review Questions

• What type of weighting method does the Dow Jones Industrial Average use?
• Who were the creators of the DJIA?
• How many companies are included in the DJIA?

Related terms

S&P 500: A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

NASDAQ Composite: An index of more than 3,000 stocks listed on the NASDAQ stock exchange, known for its high concentration of technology companies.

Market Capitalization: The total market value of a company's outstanding shares, calculated by multiplying current share price by total number of shares.