Dow Jones index. History and meaning. Dow Jones Industrial Average (DJIA)

Dow Jones index. History and meaning. Dow Jones Industrial Average (DJIA)
Dow Jones index. History and meaning. Dow Jones Industrial Average (DJIA)
20.10.2019

There is a stock exchange saying: "America sneezes, and the whole world catches a cold." But how to understand what exactly is happening with the largest economy on the planet, the state of which is closely monitored by almost all traders in the world?

Indicators of the "health" of economic processes are stock indices. As for the US, these are the S&P500 (tracks the dynamics of the 500 largest companies), the NASDAQ Composite (an index of high-tech companies) and the Dow Jones - the oldest and most famous of all indices, a barometer of American development. Even people unfamiliar with the exchange world have at least heard something about this index, and traders are familiar with it firsthand. In this article, we will explain in simple terms what the Dow Jones index is, what it affects, what it is measured in and what it depends on.

History of the Dow Jones

The Dow Jones Index, or rather, the Dow Jones Industrial Average, was developed by Charles Dow, the founder of The Wall Street Journal and the progenitor of the Dow theory. The Dow Jones Index dates back to 1884, and was originally not published, but was used for "private use", and it included 11 stocks (9 railway and 2 industrial).

Charles Dow believed that the index should confirm the dynamics of the stock. That is, the Dow Jones index shows whether the stock will continue to rise in the future or not. If the stock grows and the index too, the growth of the stock is more likely to continue. If the stock is growing, and the index began to decline, it is more likely to decline in the future. The “public” version of the index appeared on May 26, 1896 and was already called industrial (at that time the main capital-intensive companies were industrial). The index included shares of 12 companies in its basket, and was calculated as the arithmetic average of the prices of these shares. Its first value is 40.94 p.

Dow Jones Index Family

Today, the Dow Jones index, or rather, the Dow Jones family of indices, is calculated by the Standard and Poor's rating agency (the current name after the rebranding of S&P Global). This organization assigns long-term and short-term ratings to countries, issuers and individual issues debt securities in 26 countries of the world, as well as providing investors with various market research. Indices of the Dow Jones family calculate not only the dynamics of stocks, but also, for example, Dow Jones Real Estate. However, traditionally, when we mention the Dow Jones indexes, we are talking about the stock market.

The Dow Jones stock index family includes:

Dow Jones Industrial Average - the main representative of the family (30 shares)
. Dow Jones Industrial Average Yield Weighted - a similar index weighted by dividend yield,
. Dow Jones Transportation Average - an index of transport companies (20 shares)
. Dow Jones Utility Average - utility companies index (15 stocks)
. Dow Jones Composite Average is the index that unites this family. Includes industrial, transport and municipal indices - 65 shares.

In addition to American companies and tracking their dynamics, Dow Jones also monitors global trends using the Dow Jones Titans family of indices: Dow Jones Global Titans 50 (the main "world" index), Dow Jones Turkey Titans 20, Dow Jones Italy Titans 30, Dow Jones South Korea Titans 30, Dow Jones Africa Titans 50, and Dow Jones Safe Pakistan Titans 15. Each tracks the named number of shares in the largest companies in their respective regions.

Let's talk in more detail about the most famous and tracked index - the Dow Jones Industrial Average. This index is calculated in a Price Weighted way, and not only in US dollars, but also in EUR, CAD and JPY. The index calculation base includes 30 stocks of the largest companies (the S&P500, for example, includes 505 shares of 500 companies). And the name “Industrial Average” is rather a tribute to history, since the index contains several sectors with weights at once.

The total capitalization of the companies represented in the index is $5,695,582.30 million. The weight of the main heavyweight in the index is 5.4%, and the TOP-10 is 44.4%. As for the average fundamental indicators of companies from the calculation base, they are as follows: P / E - 19.75, P / B - 3.34, dividend yield - 2.49%, P / S - 1.95, P / Cash flow - 11.53.

For those who want to get the yield of the index on the NYSE, the ETF SPDR Dow Jones Industrial Average ETF Trust (ticker symbol DIA) is traded, the volume of transactions for which averages about 5 million (the price is about $200, the number in the lot is 5). Also, the Dow Jones Industrial Average index is traded in CME futures contracts, the most liquid of which are mini-contracts (E-mini). But in terms of turnover, the futures on the E-mini S&P500 are firmly holding the palm - 1.5 million against 138 thousand for the mini Dow Jones.

Rice. 2. Trade volumes on the E-mini Dow Jones Industrial Average on CME

As for the global brother of the Dow family - the Dow Jones Global Titans index - Russia ranks 16th in it - 0.7% total weight from $58,532.78 million for the capitalization of incoming companies. Our country in this list is right after South Korea, which has a similar weight indicator, but with a capitalization of $238,843.19 million. ETF SPDR Global Dow (ticker symbol DGT) is traded on this index on the NYSE, however, its turnover is much smaller and averages about 5 thousand (the price is around $70, the number in the lot is 200).

Rice. 3. Country Composition of the Dow Jones Global Titans Index

Conclusion

Despite the rich history, the Dow Jones index is somewhat less popular among traders than other key stock indices. However, it is necessary to understand what the Dow Jones index means, and also to track it - it can give more sensitive signals (due to of great importance 20 thousand pp. vs. 2,000 for SnP500).

In this article, we briefly talked about what the Dow Jones index figure means. Would you like more information on this topic? Register on the Otkritie Broker portal - we will tell you how to work with indices and earn money using their signals!

The Dow Jones is the oldest American market index in existence. This index was created to track the development of the industrial component of the US stock markets.

The index covers the 30 largest US companies. The prefix "industrial" is a nod to history - currently, many of the companies included in the index do not belong to this industry. Initially, the index was calculated as the arithmetic average of the share prices of the covered companies. Now, a scaled average is used for the calculation - the sum of prices is divided by a divisor, which changes whenever the stocks included in the index are split (split) or merged (consolidated). This makes it possible to maintain the comparability of the index, taking into account changes in the internal structure of its constituent shares.

The first versions of the index appeared in 1884 and covered the stock prices of nine railroad and two industrial companies. This version of the index was not published and served for internal analysis. For the first time the index was published on May 26, 1896 already as "industrial". At that time, the index was the arithmetic average of the stock prices of 12 American industrial companies, of which only General Electric is represented in today's version of the index (its breaks in the index from September 1898 to April 1899 and from April 1901 to November 1907).

In addition, the original index included:

  • American Cotton Oil Company, predecessor of Bestfoods, now part of Unilever;
  • American Sugar Company, now Domino Foods, Inc.;
  • American Tobacco Company, split in 1911;
  • Chicago Gas Company, bought by Peoples gas light& Coke Co. in 1897 (now Peoples Energy Corporation);
  • Distilling & Cattle Feeding Company, now Millennium Chemicals;
  • Laclede Gas Light Company, existing as The Laclede Group;
  • National Lead Company, now NL Industries;
  • North American Company, split in 1940;
  • Tennessee Coal, Iron and Railroad Company, bought by U.S. Steel in 1907;
  • U.S. Leather Company, which ceased to exist in 1952;
  • U.S. Rubber Company, renamed Uniroyal in 1967 and bought by Michelin in 1990.

In 1916, the number of companies was increased to 20, and from October 1, 1928 to 30. Rotation usually replaces one or two companies at a time in the index.

The most "turbulent" time was the Great Depression in the early 30s of the XX century:

  • On July 18, 1930, seven companies were replaced in the index at once,
  • May 26, 1932 - eight.

There were two periods of 17 years each (1939-1956 and 1959-1976) when there were no changes in the structure of the index.

The first published value of the index was 40.94. The 1,000 point mark, conquered in early 1966, became the upper bar for 15 years, during which the index suffered four brutal bearish trends, costing it an average of a third of its value.

The largest percentage drop in the index occurred on Black Monday in 1987, when the Dow dropped 22.6%. On the first trading day after the September 11, 2001 attacks, the index lost 7.1%.

There are 4 Dow Jones indexes

  • Industrial index Dow Jones (The Dow Jones Industrial Average, DJIA);
  • Transport index Dow Jones (The Dow Jones Transportation Average, DJTA);
  • Communal index Dow Jones (The Dow Jones Utility Average, DJUA);
  • Composite index Dow Jones (The Dow Jones Composite Average, DJCA), compiled on the basis of the three above.

The Dow Jones indexes are maintained and reviewed by the editors of The Wall Street Journal. In order to keep the series of values ​​running continuously, index component changes are rarely allowed, and generally occur only after corporate acquisitions or other dramatic changes in the component's core business. When such a case occurs, the component is replaced and the index is revised.

There are no specific rules for selecting components. The index includes only stocks of those companies that have an excellent reputation, show constant growth, are of interest to a large number of investors and closely correspond to the sector represented by the index.

Unlike the DJTA and DJUA, which only include shares in transportation and utility corporations, the DJIA is not limited to traditionally defined industrial stocks. Instead, the index serves as a measure of the overall US market, covering industries as diverse as financial services, technology, retail, entertainment and consumer goods.

Calculating Dow Jones Indices

The Dow Jones calculation is unique in that the indices represent a weighted price rather than a weighted market capitalization. Their change is only affected by changes in share prices.

When indexes were first created, they were calculated by adding all components and dividing by the number of components. Later, the practice of calculating the divisor was introduced to smooth out the effect of mergers, division of corporations and other corporate actions. The index is quoted in points.

  • DJIA - 0.142 799 2;
  • DJTA - 0.232 835 26;
  • DJUA - 1,714 926 23.

An example of calculating the Dow Jones index

For example, the index includes shares of four corporations.

A \u003d 26, B - 20, C - 45, D \u003d 17, i.e. average price at the end of the working day is 27.

Corporation C merged with another company and issued shares E with a price of 37. If we conduct a simple recalculation, we will see a sharp jump - the average price will be 25. In order to avoid such jumps, proceed as follows: the sum of share prices is not divided by their number, and for some denominator X - a denominator (divisor), which is selected from the condition that the index opens with the same value as it closed yesterday.

(A + B + D + E)/X = 27. So X is (26 + 20 + 37 + 17) / 27 - 3.704.

The Dow Jones Industrial Average (DJIA)

The DJIA is a simple average of the movements in the stock prices of the 30 largest industrial corporations.

Components of the Dow Jones Industrial Average as of March 10, 2015

When Charles Dow first published the industrial index on May 26, 1896, the stock market was not yet so popular. Prudent investors bought bonds that paid predictable interest and were backed by real cars, factory buildings, and other hard assets. Today, stocks are generally viewed as an investment vehicle, even by conservative investors. Now the circle of investors has expanded far beyond Wall Street.

The Dow Jones Industrial Average was created to streamline stock market information, because 100 years ago, even people on Wall Street had a hard time making sense of the daily clutter, and it was incredibly difficult to understand the dynamics of the market. Charles Dow invented the stock index to make sense of this mess. He started in 1884 with 11 shares, most of them (9) represented the railroads, which were the first big national corporations. The index has provided a convenient benchmark for comparing individual stocks with the market and for comparing the market with other indicators of economic conditions.

At first, the index was published irregularly, with daily publication in the Wall Street Journal beginning on October 7, 1896. In 1916, the DJIA expanded to 20 shares; Since 1928, the Industrial Index has included 30 corporations. Also, beginning in 1928, the editors of the journal began to calculate the average using a divisor.

The Dow Jones Industrial Average is the most commonly reported market indicator in newspapers, television and the Internet. In addition to being the oldest industrial index, two other factors play a role in its widespread popularity: it is understandable to most people and reliably indicates the underlying trend of the market.

  • maximum historical meaning(Life High) - 18,288.63 - March 2, 2015;
  • minimum historical value (Life Low) - 40.6 - July 8, 1932 ("Great Depression").

best years

  • 1915 +81,66
  • 1933 +66,69
  • 1928 +48,22

the most bad years by degree of percentage change

  • 1931 -52,67
  • 1907 -37,73
  • 2008 -33,84

Flaws

The peculiarity of the Dow Jones index is that it shows the average current stock prices without comparing them with the underlying value. Therefore, the index must be considered in comparison with a certain value taken as the basis for comparison (to a certain date).

One of significant shortcomings Dow Jones index is a way to calculate it - when calculating the index, the prices of the shares included in it are added up, and then divided by correction factor. As a result, even if one company is noticeably smaller in capitalization than another, but the value of one of its shares is higher, then it has a stronger effect on the index. Even a large percentage change in price relative to a cheap stock can be offset by a small percentage change in the price of a more expensive stock.

Covering only 30 companies, the Dow Jones is a poor fit as an index of overall stock market activity. For objectivity, the S&P 500 is sometimes used alongside the Dow Jones.

Dow Jones Transportation Average (DJTA)

The DJTA is an average of 20 transportation corporations (airlines, railroads and highways) moving in stock prices.

Components of the Dow Jones Transportation Index (DJTA) as of March 10, 2015

Although the Dow Jones Industrial Average is the most famous American index, the title of the first and oldest index rightfully belongs to the Dow Jones Transportation Index. The first Dow Jones index, proposed in 1884 by Charles Dow, co-founder of Dow Jones & Company, which was the publisher of the well-known financial newspaper The Wall Street Journal, was composed of stocks of nine railroads, including the New York Central and the Union Pacific, and two non-railway companies - Pacific Mail Steamship and Western Union. It was the ancestor of the modern transport index. At that time, the really strong companies were represented primarily by the railways.

In 1896, the Dow published a list of 20 "active" stocks, 18 of which were railroad stocks, and this was the direct predecessor of the industrial index. In the same year, the Dow Jones Industrial Average appeared. On September 8, 1896, the index was 48.55 points. Since then, iron companies such as Union Pacific (the only component left from the first index) have been joined by companies such as Delta Air Lines, Federal Express and Ryder System.

An analytical system based on the Dow indices works approximately as described below. It is believed that the Dow Jones Transportation Index should "certify" the movement of the industrial index to confirm the strength of the current trend. If industrial stocks make a new high, transport stocks should also make a new high to “confirm” the trend. The trend reverses when both averages experience sharp declines within the same time frame.

  • maximum historical value (Life High) - 9214.59 - February 25, 2015;
  • minimum historical value (Life Low) - 13.2 - July 8-9, 1932 ("Great Depression").

The Dow Jones Utility Average (DJUA)

DJUA is an average of the stock price movements of 15 gas and electricity companies.

Components of the Dow Jones Community Index (DJUA) as of March 10, 2015

The Dow Jones Communal Index is the youngest of the three Dow Jones indexes; it debuted in January 1929. According to index analysts, rising utility stock prices indicate that investors expect interest rates to fall. The fact is that utilities are big borrowers, and their profits increase at low interest rates and vice versa. The utility index tends to decrease when investors expect interest rates to rise. Because of this sensitivity to interest rate the communal index is regarded by some as the leading indicator for the stock market as a whole.

Unlike the industrial index, which has undergone more than 100 changes in over 100 years, the communal index has been relatively unchanged. Most of the changes in recent years are the result of mergers and acquisitions.

Initially, the communal index included 18 shares, and 6 months later, on July 1, 1929, their number was increased to 20, on June 2, 1938, the number of shares was reduced to 15 - at this level the index remains to this day.

  • maximum historical value (Life High) - 657.10 - January 28, 2015;
  • minimum historical value (Life Low) - 16.35 - July 11, 1932 ("Great Depression").
In 1884, the American financial analyst Charles Dow, together with his partner Edward Johnson, developed a composite indicator based on the stock price of 11 major American companies, of which two were industrial and nine were railroad. Soon, having finalized his concept, he began to publish his calculations in a small, two-page business newspaper, which quickly gained popularity among New York financiers. Later, on its basis, the Wall Street Journal, which exists to this day, began to appear.

Thus, the first Dow Jones index was released in 1886: then it was based on stock quotes of 12 major US industrial companies and was calculated as the arithmetic average of these indicators. As a result, the starting point for the Dow Jones index was a value equal to 40.94 points. Gradually, the number of index components increased: in 1916 it reached 20, and in 1928 - 30.

This number of companies is used to calculate the Dow Jones index today. However, only one company, General Electric, has remained among the first participants in the indicator. Its modern name is the Dow Jones Industrial Average, which on the international stock market is denoted by the abbreviation DJIA, which is an abbreviation of the English name of the index - "Dow Jones Industrial Average". However, some of the companies whose stock quotes are now used to calculate the index are no longer actually in the industrial sector.

Index dynamics

The Dow Jones index has long left its first value, slightly exceeding 40 points. This happened due to a significant increase in the value of shares of companies included in the calculation, as well as a revision of the initial composition of the index. Thus, in 1966 the indicator for the first time reached a value exceeding 1,000 points, in 1995 it exceeded 5,000 points for the first time, and in 1999 - 10,000 points.

The maximum value of the index - 11728.98 points - was recorded in 2000, which became one of the most successful for the American economy. The most significant drops in the history of the indicator were recorded in 1987, when on October 19 the shares of most American companies collapsed for no apparent reason, and in 2001, when the American stock market collapsed under the influence of news of the September 11 terrorist attack. Then, in one day, the index value fell by 22.6% and 7.1%, respectively.

The Dow Jones index is an indicator of the economic condition of the United States, calculated on the basis of the 30 largest companies. Note that this list of companies is dynamic and therefore subject to change. The list is compiled by the editors of The Wall Street Journal.

Dow Jones Index - a brief history of creation

By 1928, the number of companies whose shares are used to calculate the index had increased to 30, and has remained so to this day.

At the same time, the index calculation methodology was also changed - a “current divisor” was introduced to prevent distortion of values ​​caused by share splits, listing changes, dividend payments and other factors. Thus, the Dow Jones index can be characterized as a separate economic branch(transport, industry and others), and the entire stock market as a whole.

Today, the shares used in the Dow Jones index itself are listed on the American stock exchange NYSE and account for at least 20% of its total turnover. valuable papers.

Note that the composition of this index is not constant and the components that it includes may change depending on the positions of the largest companies in the US economy. The NYSE publishes and updates data on the Dow Jones index throughout the day of the exchange every 30 minutes.

In this way, The Dow Jones index allows analysts and investors to assess the market situation based on a single value, rather than focusing on studying individual companies.

Investing in the Dow Jones Index

The values ​​of sectoral and industrial indices are not limited solely to economic research and business planning. Great attention to the dynamics of indices is also shown by private investors and large investment funds during the compilation of their own investment portfolios.

It is on the purchase of shares that are included in the structure of indices that portfolio investment is based. And since the most reliable and largest issuers are in the indices, this can significantly reduce investment risks.

If we consider long term, then investments in indices have a clear priority over bank bonds and deposits.

Considering the practical implementation of investing in indices, there are 4 main types of investment:

  • acquisition of shares of all organizations included in the index;
  • purchase of futures for indices;
  • purchase of CFD contracts;
  • acquisition of shares of ETF funds that invest in indices.

All listed types investment activity have both advantages and disadvantages. So the inconvenience when working with stocks is simply obvious - huge expenses when building portfolios, the need to track the composition of indices in order to replace retired companies with new ones, the loss of time when selling portfolios if profit-taking and moving to higher-yielding assets are required, and much more.

But at the same time, this species investing also has a number of advantages, the main of which, unlike indices, is the receipt of dividends. For comparison, consider the return on investment in the Dow Jones index and in the same stocks of companies included in it.

As you can see, equity investment showed an average annual return almost 2 times higher. And if you take into account the entire investment period, you can get astronomical numbers! At the same time, one should not forget about inflation, taking into account which the return on shares included in the Dow Jones index itself will look like this:

The next type of investment - the purchase of futures for the Dow Jones index, is associated with considerable costs, and therefore is available only to large professional investors. For example, on the CBOT (Chicago Mercantile Exchange), you can trade $5 Mini Dow (small futures) and $25 Big Dow (large futures). As you guessed, $5 and $25 is the cost of 1 point of the index value, that is, to trade even the Mini Dow, you will need at least $100,000.

But there is a loophole here too - to make short-term transactions that do not require large capitals, since not deliverable futures are used here, but settlement ones. When a trader opens a long position, he receives a profit that is proportional to the increase in the index, and when a short position is proportional to the decrease in the index.

most accessible and in a simple way investing in the Dow Jones Index is considered to be used to purchase CFD contacts.

Here, the only non-trading risk may be only the unreliability of the brokerage company. Profit when buying CFD contracts is obtained due to price changes in assets in the interval between opening and closing positions.

At the same time, this type of investment does not require large investments, just a few dollars. For example, the following conditions for trading on CFD contracts:

Well, the most the best option investing in the Dow Jones index is considered to be the acquisition of shares in ETF funds. Here, traders ensure the safety of their own funds with minimal requirements for their size. The most well-known ETF fund today that invests in the Dow Jones Index is DIA, which is part of the State Street Global Advisors trust.

Features of investing in the Dow Jones index - sometimes it's better to wait

Smart investors always try to choose the right time to buy stocks. As you know, according to market laws, price growth cannot continue indefinitely, there always comes a corrective moment and the ability to buy at a local bottom - major step to success.

It is known that in recent years the Dow Jones index has risen almost exclusively due to speculative trading in the market, which at the end of 2016 led to its record fall, since the share of investors in the US stock market at that time was significantly reduced.

From the charts above, you can see that the options for buying are extremely unfavorable and smart investors preferred to wait for a major correction, which happened after the election of Donald Trump.

From the very first days of his presidency, Trump signed several decrees (the US withdrawal from the Trans-Pacific Partnership, the abolition of the previous administration's medical insurance system, etc.), resumed the construction of the Keystone and Dakota Access oil pipelines, promised legislative and tax breaks to the country's largest automobile manufacturers (General Motors, Ford and Fiat Chrysler) and so on.

All this led to the fact that Dow Jones index updated its historical maximum and stepped over the mark of 20 thousand points. The growth of the index did not stop there. So, as of January 9, 2018, due to the increase in share prices of companies producing consumer goods, organizations in the healthcare and banking sectors, as well as the rise in oil prices, the Dow Jones index increased by 0.41% and closed with a value of 25385.80 points.

Briefly about the Dow Jones index

(DJIA) is one of the most authoritative stock indices in the world. Introduced 120 years ago, in 1896, Dow Jones evaluated only the American transportation sector. Today, along with the S&P, it is a measure of the value of the whole world and is traded on (New York Stock Exchange, NYSE).

The capitalization of 30 participating companies exceeds 5 trillion. US dollars and continues to grow.

All structures are the largest in the world, and the impact they have on financial processes cannot be overestimated. it Apple, Boeing, Coca-Cola, Intel, MacDonald's, Microsoft, American Express, DuPont and others. There was no place even for a titan in the company - Google.

It is the oldest and most referenced index. It is calculated by adding the closing prices of all its constituent shares and dividing the resulting amount by a divisor, which is calculated in a certain way. Like all the other indices we're talking about here, the Dow is expressed in points (not dollars).

Dow Jones Chart Online - Price Today and All Time

Composition and Companies of the Dow Jones Index

The list of corporations included in the Dow Jones index varies depending on the results of trading on stock exchange. The formation of 30 companies most important for the United States market is handled by Wall Street Journal» .

At the moment it looks like this:

  • 3M Co. (Industry)
  • american express co. (Finance and lending)
  • AT&T(Communications and Communications), Owned by Apple since March 18
  • Boeing Co.(Aircraft)
  • Caterpillar Inc.. (Cleaning and construction equipment)
  • Cisco Systems(Communication and communications)
  • Chevron Corp.
  • coca-cola co.(Food)
  • E.I.duPontdeNemours&Co.(Chemical industry)
  • Exxon Mobil Corp.. (Production and processing of hydrocarbons)
  • General Electric Co.. (Industry)
  • The Goldman Sachs Group, Inc.. (Finance and lending)
  • Home Depot Inc.. (Building materials)
  • Intel Corporation. (Production of semiconductors)
  • International Business Machine Corp.. (Computer technology)
  • JPMorgan Chase and Co. (Finance and lending)
  • Johnson&Johnson Inc.. (Chemical industry)
  • McDonald's Corp. (Food)
  • Merck&Co., Inc.. (The medicine)
  • Microsoft Corporation. (Software production)
  • Nike Inc.. (Sporting goods)
  • Pfizer Inc.. (The medicine)
  • Procter&Gamble Co.. (Chemical industry)
  • Travelers(Finance and lending)
  • United Health Group Inc.(The medicine)
  • United Technologies Corp.. (Industry)
  • Verizon Communication(Communication and communications)
  • Visa Inc..(Finance and lending)
  • WalMart Stores, Inc.. (Retailer)
  • Walt Disney Co.. (Media)

Index history

The Dow Jones index can be said to be a "dinosaur" among modern stock market indices in the United States. It was born with a clear task: to track and visually reflect the dynamics of the industrial sector of the American stock exchange.

The concept was invented by the editor-in-chief Wall Street Journal and economic observers Edward Jones and Charles Dow. The indicator was not comprehensive and assessed only transport infrastructure United States - 9 railroads and 2 industrial enterprises. The first name was " Dow Jones Transportation Average» - Dow Jones transport value.

In 1884, when Charles Dow began writing an economics column for the Wall Street Journal, the index was defined as 50 basis points. After a series of economic crises that occurred in the United States every 7-10 years, transport companies were eliminated, and the index was renamed to "" (Dow Jones industrial index - DJIA or Dow 30).

Presentation Dow Jones with the familiar prefix " industrial”(Industrial Average) occurred on May 26, 1896. Now it reflected the arithmetic mean of the securities prices of 12 most important US corporations. To date, only one of these issuers has survived in the ranks of DJI: General Electric(it was excluded from the index from September 1898 to April 1899 and from April 1901 to November 1907).

  • The first blow fell on 1896, when the quote fell to 28.48 basis points. The beginning of the first world war, 1914, the Dow Jones met at around 103 points, although due to the crises of 1901 and 1907, it dropped to 50 marks. The economic recovery of the 1920s led to a change in the structure: the number of participants reached 30. The quote, thanks to speculators, exceeded 381 points.
  • Into the great depression the index began to decline. By 1932, it barely exceeded 42 basis points, while by the mid-1950s it had crossed the mark of 216 points. Everything affected the growth, and the decolonization of European possessions, and numerous fighting around the world, so in 1951 and 1957 the US government had to carry out a forced decline in the index.
  • The first strike of the new time fell on 1987, when the DJIA fell from 2,753 to 1,796 points, which is not surprising: in 10 years, the bulls managed to raise the quote from 838 to 2,753 points! By 1993, it exceeded 3,000 points, 1995 - 5,000 points, 1997 - 8,000 points. World economic crisis served in good stead, and by 1999 the mark of 11,000 base marks had been reached.
  • The fall of the Twin Towers on September 11, 2001 dropped the index by 14.3%, and trading from 11 to 17 September was stopped. The recovery, which lasted until 2008, ended with a drop in oil prices, and the Dow Jones dropped from 14,000 to 11,000 points. Until the summer of 2015, the bulls took the initiative, and the Big Dow crossed the 18,000 basis mark several times.

Dow Jones index value

How to make money on the Dow Jones

One side Dow Jones index easily lends itself to analytics, as there is a lot of news on the index. For example, many exchange participants work only with this index, making dozens of transactions per day.

But on the other hand, it is very difficult to analyze the index, since it is not always possible to keep track of everything. In addition, the price of the index is influenced not only by the companies included in it, but also world economy and politics.

For example , in 2015 The Dow Jones hit an intraday high of five months. And all this thanks to the news from Russia. According to the Secretary of the Security Council, Russia decided to continue to act as an intermediary between Kyiv and the South-East of Ukraine and make efforts to de-escalate the conflict.

As you can see, the news is not at all related to Coca-Cola and other companies in the index, but it affected the US economy, political stability and the Dow Jones index as an indicator of the US economy.

In order to make money on the Dow Jones index, it is important to understand that this index has become the personification of Wall Street and the American economy as a whole.

You need to keep an eye on US industrial data, the most important economic indicators with a high degree importance.

You can use forecasts in which the index is named US 30— this name of the index is quite common on some exchanges.

On the page market watch(http://www.marketwatch.com/investing/index/djia/news) you can view the latest news related to the index.

As you can see, technical analysis does not always help here, since the price of the index directly depends on the economic and political situation in the world. News comes out quite often and the index follows world events. Personally, I'm not convinced that indicators or other technical analysis tools can accurately predict price. maybe I'm wrong, but it seems to me that fundamental analysis in this case will be more reliable in the long run.

Where to make money on the Dow Jones index

We preferred a broker. In order to make money on the index in the most profitable way, it is best to use, as they will give you fixed income over 70% per transaction.

You need to determine whether the price will rise or fall in a specified period, for example, in the next 20 minutes. Specify the term of the option, the amount of investment and indicate your forecast.

If your prediction is correct, you will receive 70-85% profit even if the price changes even by 0.001 points in the direction of your forecast.

Having opened, we indicated the asset - Dow Jones index:

The time of the end of the transaction indicated on 18:10 (in 16 minutes):

After analyzing the chart and conducting technical analysis, we invested in the growth of the index — “ UP«:

If at the time of closing the option the price of the index is higher than at the time of purchase, we will make a profit since the condition of the option will be fulfilled.

After 16 minutes, we got the result:

The chart shows how literally after the opening of the transaction, the quote on the Dow Jones crept up according to our forecast. DJA brought us $42.9 in net profit!

Dow Jones Calculation Method

The Dow Jones index takes into account the 30 most large corporations USA. The name "industrial" refers more to a good tradition than to a real reflection of economic performance. At the moment, most of the issuers present in the index are not related to industry and represent more post-industrial areas of information services and technologies.

The calculation method is simple: The total value of the 30 shares traded is divided by a floating rate, which changes regularly based on share splits, additional income and expenses, and changes in the structure of participants' companies. Initially, the divisor was the arithmetic average of the capitalization of companies, now it is calculated using a special formula.

In this formula P is the price of the stock being traded, and d- divider. As mentioned above, it is of a floating nature, and in case of a share split or a change in the list of companies, it is updated, but the old quote is taken equal to the new one.

  • The latest value of the Dow Divisor (December 24, 2015) is +0.14602128057775. Arithmetic calculations show that a $1 change in the price of 1 share gives the index approximately 6.85 basis points (1 / +0.14602128057775). This scheme causes serious complaints from economists and stock analysts around the world.

The formula, taking into account a price change of $1, does not reflect the price of a share and the share of one dollar directly in it.

For a cheap stock, this will be a serious rise, for an expensive one, a barely noticeable adjustment.

In October 2008, the shares AIG because of the "bears" they fell from 27 to 1.5 dollars, which dropped the stock index by 3,000 basis points.

And further: The most expensive companies in the index are Goldman Sachs and 3M, the cheapest are Cisco Systems and General Electric. Considering that the price of shares of companies varies significantly, and there are a different number of securities in circulation, the first two corporations play the maximum role in the index, and the last two the minimum. The decline in their quotes will greater value to the market than others.

Dow Jones Index dependencies

  • too few companies participate;
  • members of the index are unequal in terms of capitalization and market impact;
  • the collapse of just one of 30 companies hits the entire index;
  • highly dependent on oil prices and US foreign policy;
  • contains only 1-2 companies from different sectors of the economy.

Benefits of the Dow Jones 30 Index

  • Determines the stock quotes of the whole world;
  • Shows steady growth despite the collapses;
  • With a speculative nature, it reflects the real level of the economy;
  • We easily predict taking into account the political situation;
  • Seriously tied to oil prices.

The Dow Jones family includes several dimensions, the most important and significant of which was and remains the Dow Jones Industrial Average. Also known:

  • Dow Jones Transportation Average;
  • Dow Jones Utility Average;
  • Dow Jones Composite Average;
  • The Global Dow;
  • Dow Jones Global Titans 50 Index;
  • Dow Jones Total Stock Market Index;
  • Dow Jones Sustainability Indexes;
  • Dow Jones-UBS Commodity Indexes;
  • Dow Jones Target Date Indexes.

There are no uniform rules for the inclusion or exclusion of members in the Dow 30, the decision is made by a board of stock analysts headed by the editor-in-chief of the Wall Street Journal.

There are also no selection criteria, they are based on the financial results of the participants over the past few months. This has repeatedly caused criticism from experts, but the WSJ is one of the founders DJIA.

Working with the Dow Jones 30 is one of the key skills of any trader, both a beginner and a very successful one.

The situation on everything depends on this indicator. financial market of the world, and DOW 30 signals should not be neglected in any case.

This is a proven tool that is certainly an extremely interesting tool for tracking stock fluctuations, despite its age and outdated approach to calculating values.

Of all the Dow-tracking index funds - or , the most popular is the fund Dow Diamonds(his ticker is DIA).

If you find an error, please highlight a piece of text and click Ctrl+Enter and we will definitely fix it! Thank you so much for your help, it is very important for us and our readers!