Glossary
Dow Jones Industrial Average (DJIA)
A price-weighted index of 30 large US companies, first published in 1896 and the oldest widely followed US stock average.
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The Dow Jones Industrial Average is a stock index that tracks 30 large, well-known US companies. Charles Dow first published it on May 26, 1896, with 12 mostly industrial stocks; it grew to 30 members in 1928 and today spans technology, finance, healthcare and retail as well as industry. It is maintained by S&P Dow Jones Indices, and "the Dow" is still the number most news reports quote first.
Price weighting
Unlike the S&P 500, which weights companies by Market capitalization, the Dow is price-weighted: a stock's influence depends on its share price, not on the size of the company.
The divisor is adjusted whenever a member splits its stock or the lineup changes, so those events do not by themselves move the index. It has been about 0.16 in the mid-2020s, which means each $1 change in any member's price moves the Dow by roughly six points.
Strengths and limits
The Dow's long history, back through the 1929 crash and every bull market since, makes it useful for historical context. But 30 stocks are a narrow sample of a market with thousands of listed companies, and price weighting is an accident of history rather than a design choice anyone would make today. Most professionals use the S&P 500 as the benchmark for US large-cap stocks. Investors can track the Dow through ETFs such as DIA, and through Dow futures outside regular hours.