Dow Jones Industrial Average
Definition
A stock market index that tracks 30 large, publicly-owned companies trading on the NYSE and NASDAQ, serving as a benchmark for overall market performance.
The Dow Jones Industrial Average (DJIA) is one of the oldest and most widely followed stock market indices in the world, created by Charles Dow in 1896. It tracks 30 prominent U.S. companies across various industries, excluding transportation and utilities, which have their own Dow indices.
Unlike the S&P 500, the Dow is price-weighted, meaning stocks with higher share prices have more influence on the index's movement. This methodology has been criticized because a high-priced stock can disproportionately affect the index regardless of the company's total market value.
Despite its limitations, the Dow remains a key benchmark for gauging U.S. stock market health and overall economic sentiment. The index is maintained by the S&P Dow Jones Indices committee, which periodically replaces components to keep the index representative of the U.S. economy.
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Related Terms
S&P 500
financeA stock market index tracking 500 of the largest publicly traded companies in the United States, widely regarded as the best gauge of large-cap U.S. equities.
NASDAQ
financeA global electronic stock exchange known for listing many technology and growth companies, and the index that tracks its performance.
Market Capitalization
financeThe total market value of a company's outstanding shares of stock, calculated by multiplying share price by total shares outstanding.
Securities
financeTradable financial instruments including stocks, bonds, and options that represent ownership, debt, or the right to buy or sell an underlying asset.
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