Before even Dow Jones Industrial Average came into practice, financial services experts used to compute stock average by simply adding up the prices and dividing by the number of stocks. Thereafter stock market experts started using an index to differentiate the stock market's long-term trends from short-term fluctuations. This was quite a significant change in the stock market world. And then came the Dow Jones Industrial Average in 1896, which is considered as one of the best averages even today. It started with small number of stocks but later on went to include the stocks of 30 most popular companies like IBM, Bank of America, Alcoa, Exxo, Goodyear and General Motors. These 30 stocks are all major factors in their industries and their stocks are widely held by individuals and institutional investors.Using such large, frequently traded stocks provides an important feature of the Industrial Average: timeliness. At any moment during the trading day, the price of the Dow Jones Industrial Average is based on very recent transactions. This isn't always true with indices that contain less-frequently traded stocks.
The Dow Jones Industrial Average is the most-quoted market indicator in newspapers, on television and on the Internet. Besides longevity, two other factors play a role in its widespread popularity. First is its simplicity that makes it easily understandable to most people and second is its reliability that indicates the market's basic trend. The Dow Jones Industrial Average is the second oldest U.S. market index, following the Dow Jones Transportation Average (DJTA), also created by Charles Dow. It was originally intended to measure the movements of companies within the heavy industry, like construction companies and businesses dealing with heavy products. However, today, that name is strictly historical; very few of the index's 30 companies have anything to do with industrial goods.
The Dow Jones Industrial Average is the most-quoted market indicator in newspapers, on television and on the Internet. Besides longevity, two other factors play a role in its widespread popularity. First is its simplicity that makes it easily understandable to most people and second is its reliability that indicates the market's basic trend. The Dow Jones Industrial Average is the second oldest U.S. market index, following the Dow Jones Transportation Average (DJTA), also created by Charles Dow. It was originally intended to measure the movements of companies within the heavy industry, like construction companies and businesses dealing with heavy products. However, today, that name is strictly historical; very few of the index's 30 companies have anything to do with industrial goods.