Dow Jones Industrial
Average. The most widely used
indicator of the overall
condition of the
stock market, a price-weighted average of 30 actively traded
blue chip stocks, primarily
industrials. The 30 stocks are chosen by the
editors of the
Wall Street Journal (which is published by
Dow Jones &
Company), a
practice that
dates back to the beginning of the century. The Dow was officially started by Charles Dow in 1896, at which time it consisted of only 11 stocks. The Dow is computed using a price-weighted
indexing system, rather than the more common
market cap-weighted indexing system. Simply put, the editors at WSJ add up the prices of all the stocks and then divide by the number of stocks in the
index. (In actuality, the
divisor is much higher today in
order to
account for
stock splits that have occurred in the past.)
