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What is the Dow Jones Industrial Average?

What is the Dow Jones Industrial Average?

The Dow Jones Industrial Average (DJIA) is an index comprised of 30 'significant' U.S. stocks, typically the biggest and most frequently traded.

The Dow Jones Industrial Average was created in 1896 by Charles Dow, as a way to track the general trend of U.S. stocks. The index is price-weighted versus cap-weighted, meaning that if a company splits 2 for 1 it's contribution to the index will drop by half (even though the value of the company did not change).

For this reason, even though it is arguably the most widely-followed index, it is not an optimal reflection of the markets and the economy.

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Keywords: market indices, Dow Jones Industrial Average (DJIA), price-weighted index, stock split, domestic stocks,