Dow Jones Industrial Average (DJIA)

Definition

The Dow Jones Industrial Average (DJIA) is a stock market index that measures the performance of 30 significant publicly traded companies in the United States. It is one of the oldest and most widely-recognized indices in the world, often used as a barometer for the overall health of the U.S. stock market.

5 Must Know Facts For Your Next Test

1. The DJIA was created by Charles Dow in 1896.
2. It includes companies from various industries except transportation and utilities, which have their own separate indices.
3. The index is price-weighted, meaning stocks with higher prices have more influence on its performance.
4. Changes to the list of companies included in the DJIA are relatively infrequent but can reflect shifts in the economic landscape.
5. Historically, the DJIA has shown long-term growth despite short-term volatility.

Review Questions

• How many companies are included in the DJIA?
• What type of weighting does the DJIA use to calculate its value?
• Why might a company be added or removed from the DJIA?

Related terms

S&P500: An index measuring the stock performance of 500 large companies listed on stock exchanges in the United States.

NASDAQ Composite: An index that includes all stocks listed on the NASDAQ stock exchange and is heavily weighted toward technology sectors.

Stock Index: A measurement of a section of the stock market calculated from the prices of selected stocks.