How is the Dow Jones industrial average calculated?
Quote from Seong Family on June 21, 2006, 1:16 amThe Dow is essentially the average price of its 30 component stocks if they had never been split, issued dividends, or undergone major changes such as spin-offs or mergers during the time they were listed in the index. To get from current stock price levels to the larger index number, a number called the "divisor" is used. To calculate the DJIA, the current prices of the 30 stocks that make up the index are added and then divided by the Dow divisor, which is constantly modified.
The Dow is essentially the average price of its 30 component stocks if they had never been split, issued dividends, or undergone major changes such as spin-offs or mergers during the time they were listed in the index. To get from current stock price levels to the larger index number, a number called the "divisor" is used. To calculate the DJIA, the current prices of the 30 stocks that make up the index are added and then divided by the Dow divisor, which is constantly modified.