A Comprehensive Guide to Understanding the Dow Jones Industrial Average

What is the Dow Jones Industrial Average?

The Dow Jones Industrial Average (DJIA), also known as "the Dow," is a stock market index that measures the performance of 30 large, publicly traded companies listed on the New York Stock Exchange (NYSE) and the Nasdaq Stock Market. It is one of the oldest and most widely followed stock market indices in the world, serving as a barometer of the overall health of the U.S. stock market.

How is the DJIA Calculated?

The DJIA is calculated by summing the share prices of the 30 component companies and dividing that sum by a divisor, which is adjusted to account for stock splits and other corporate actions that would otherwise distort the index's value. Unlike other stock market indices that use a market capitalization-weighted approach, the DJIA uses a price-weighted approach, meaning that the share price of each component company has an equal impact on the index's value.