If you're into stock investments but you don't know the Dow stock market today, then you've got a serious problem. The Dow stock market represents one of the largest and most essential financial news companies in the world, with a firm that was founded more than a century ago. In 1889, the very same team responsible for the Dow stock market today, and the DJIA that is used for investments, founded the "The Wall Street Journal", which is one of the most influential financial publications in the world.
The Dow stock market is based on the Dow Jones Industrial Average, or DJIA. Often, it's referred to as "the Dow", and it is by far one of the most-watched stock indexes in the entire world. Making use of information obtained for companies like Microsoft, General Electric, Coca-Cola, and Exxon, the Dow Jones Industrial Average represents numerous sectors of the economy. Often, in the world of finance, you'll hear people asking how the market performed, and this is when people are referring to the DJIA – the most widely used index available.
The Dow Stock Market Today
Within America, there are three indexes associated with market movements that are essential to investors. The first is the Nasdaq Composite, the second is the Standard & Poor's, and the third is the Dow Jones Industrial Average, or DJIA. Collectively, the various different market indexes combine together to be referred to as the Security Market Indicator Series. This series helps to offer investors a basic signal in regards to how specific markets perform every day. Within these three options for investment info, the DJIA is the one that is most popularly used. The daily news simply wouldn't be complete without information about the Dow.
How to DJIA Numbers Translate into Dollar Values
While it can be easy enough to understand how the DJIA works, and even apply it to different stocks evident within the market, some people struggle to figure out how the DJIA number applies to dollar value. To figure out how the change in the upward or downward movement in a stock affects the index, simply divide the stock price change by the current divisor provided. For example, if a stock was up by approximately $5, you'd need to divide the 5 by the DJIA number, for example: 0.14418073, which would make 34.36. This simply means that if your DJIA moves upward by one hundred points one day, that one company would be responsible for 34.68 points of that movement.
Weighing the Index
When it comes to the DJIA's method of calculating an index, the "price-weighted" approach is used. Beyond simply having to deal with stock splits, the problem with this method is that it doesn't reflect the fact that a $1 change in a $10 stock can be far more significant according to percentage, than a $1 change for a stock worth $100. Because of these problems, many other major indexes are based on market-capitalization weighing.
However, despite its shortcomings, the Dow is still primarily the most-watched, and most-used indicator of stock market performance.