All About Dow Jones
Dow Jones Industrial Average is the most followed stock index in the world. It was first calculated on 26 May 1896, calculating only industrial stocks. It tracks 30 publicly traded stocks in the United States. It is the second oldest US market index after the Dow Jones Transportation Average, also created by Charles Dow in 3 July 1884.
Dow Jones & Company was founded in 1882 by Charles Dow, Edward Jones and Charles Bergstresser. Charles Dow and Charles Bergstresser are journalists and Edward Jones is a statistician.
Recap
In 1902, Clarence Baron bought the Dow Jones & Company after death of Charles Jones
In 1928, control was passed to stepdaughters Jane and Martha Bancroft after Clarence Baron’s death (64% voting stock)
In 2007, News Corp own the company taking over from Bancroft family at US$5 billion
In 2010, CME group bought Dow Jones Indexes
Many Names of DJIA
Dow Jones Industrial Average
Industrial Average
Dow Jones
Dow Jones Industrial
Dow 30
Characteristics
Price-weighted & Scale-weighted
Price-weighted is the average price of the stocks
Scale-weighted is to account for the stock adjustments (splits, dilutions, mergers)
The scale weighted is tracked by a divisor, which changes whenever there is a stock adjustments.
The index
As the divisor is currently less than one, the value of index is larger than the total of the stock prices.
Of the original 12 industrials, only General Electric currently remains part of that index. (January 2015)
Original 12 components of Dow Jones
- General Electric
- American Cotton Oil Company, a predecessor company to Bestfoods, now part of Unilever.
- American Sugar Company, became Domino Sugar in 1900, now Domino Foods, Inc.
- American Tobacco Company, broken up in a 1911 antitrust action.
- Chicago Gas Company, bought by Peoples Gas Light in 1897, now an operating subsidiary of Integrys Energy Group.
- Distilling & Cattle Feeding Company, now Millennium Chemicals, formerly a division of LyondellBasell, the latter of which recently emerged from Chapter 11 bankruptcy.
- Laclede Gas Company, still in operation as the Laclede Group, Inc., removed from the Dow Jones Industrial Average in 1899.
- National Lead Company, now NL Industries, removed from the Dow Jones Industrial Average in 1916.
- North American Company, an electric utility holding company, broken up by the U.S. Securities and Exchange Commission (SEC) in 1946.
- Tennessee Coal, Iron and Railroad Company in Birmingham, Alabama, bought by U.S. Steel in 1907; U.S. Steel was removed from the Dow Jones Industrial Average in 1991.
- U.S. Leather Company, dissolved in 1952.
- United States Rubber Company, changed its name to Uniroyal in 1961, merged with private B.F. Goodrich in 1986, bought by Michelin in 1990.
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