Index Dow Jones Industrial Average is a barometer of the world economy
Index Dow Jones Industrial Average (DJIA) - one of the
key indicators of global stock market. A significant change in this index may cause a
panic in the financial sites around the world and even lead to unpredictable consequences
in the global economy. Let us see what sort of magic code and why it is his influence?
Inventor of the stock index is father genre financial analytical journalism Charles Dow.
Once upon a time, along with his friend Edward Jones, he opened a New York firm, main
activity was the production of information leaflets stock. Thanks to their efforts in
1983, the first newsletter went out "Customer's Afternoon Letter", which was
published a summary table with the change in stock prices during the day. While this
information was akin to insider - brokers themselves, such data were collected for
themselves and take into account, but a wide range of clients who had no direct relation
to the stock exchange trading, these data were not available. Brochures were moving
regularly and enjoyed great demand among gamblers. And quite soon grew into a homely
newsletter "The Wall-Street Journal". But Charles Dow went further: he realized
that for more reliable analysis of the market can be seen not only price changes on
individual stocks and calculate the average price of some stocks and see how it will
evolve over time from day to day. This average price was called the index. So, for the
first time the Dow was published in 1984 and was an average of stock prices the largest
U.S. railroad companies. And 12 years later, May 26, 1896 and the Dow Jones Industrial
first published stock market index, calculated as the average of 12 U.S. stock prices of
leading industrial corporations, stock exchange NYSE. Initially, the index had been
included shares of companies that are up to our days in its original form is not
preserved, and now are part of some other corporations, other owners and have a different
name.
At the present time is calculated four Dow Jones: industry - the average price of 30
leading industrial enterprises of the United States, transport - by 20 transport companies
(road, railroad and air), utilities - 15 companies involved in gas and electricity and a
synthesis - the average the three described. Shares of all the leading companies involved
in the calculation of indices, traded on major U.S. stock exchange NYSE. The main is Dow
Jones Industrial Average (DJIA 30): namely, the index moves the world stock markets and
entail changes in the whole financial world and as a consequence - in the world economy as
a whole. Preparation and counting of deals the company Dow Dow Jones & Company,
belonging to the group News Corp. Australian billionaire Rupert Murdoch. Currently in the
index Dow Jones Industrial Average includes not only industrial companies but also
enterprises involved in other activities. Below is a list of companies to date, stock
prices which are involved in calculating the DJIA 30:
1.3M (conglomerate)
2.Alcoa (aluminum)
3.American Express (crediting)
4.AT & T (telecommunications)
5.Bank of America (Finance)
6.Boeing (aerospace industry)
7.Caterpillar (engineering)
8.Chevron (oil and gas)
9.Cisco (telecommunications)
10.Coca-Cola (food)
11.DuPont (chemistry)
12.Exxon Mobil (oil and gas)
13.General Electric (conglomerate)
14.Hewlett Packard (computer industry)
15.Home Depot (building materials)
16.Intel (semiconductors)
17.IBM (computer industry)
18.Johnson & Johnson (pharmaceuticals)
19.JP Morgan Chase (Finance)
20.Kraft Foods (food)
21.McDonald 's (restaurant business)
22.Merck (pharmaceuticals)
23.Microsoft (software)
24.Pfizer (pharmaceuticals)
25.Procter & Gamble (household chemicals)
26.Travelers (insurance)
27.United Technologies (engineering)
28.Verizon (telecommunications)
29.Wal-Mart (retail)
30.Walt Disney (media and entertainment)
General Electric - only one sourdough index since its inception. The rest of the list of
companies has changed: companies that lose their status of "flagship" of the
American economy, are excluded from the index, and replace them with new ones.
Interestingly, no special rules for inclusion in the list to calculate the index does not
exist. Experts Dow Jones guided by only one criterion: the general reputation of the
company and interest in it by speculators. If the company is financially insolvent or
simply losing his "face", it is excluded from the index. List of companies in
the index, in peaceful times change very rarely. The most violent period for the index
were the Great Depression, 30-s of the 20 Century: July 18, 1930 in the index are replaced
once the seven companies, and May 26, 1932 - eight. Since 2008, in our time of crisis the
index list of participants has already been upgraded three times. Last updated June 8,
2009. Newcomers to the list: networking vendor Cisco and insurance company Travelers; they
are included in the calculation of the index instead of the financial group Citigroup and
auto giant General Motors.
General Motors shares were included in the index since 1925. June 1, 2009 General Motors
began filing for bankruptcy, asking the courts to provide protection from creditors on 11
th article of the U.S. Bankruptcy Code. The restructuring will reduce the concern 21
thousand jobs and stop production at 12-14 U.S. plants. In connection with Citigroup CEO
of Dow Jones Indexes John Prestbo in an interview with Bloomberg said that «Citi now, in
fact, lives at the expense of public assistance, and preservation of its shares in the
index would place the entire Dow dependent on the activity of the U.S. Treasury Department
.
Prior to this change in the index occurred in 2008. Feb. 19 instead of securities of the
largest manufacturer of tobacco products Altria Group and avionics manufacturer Honeywell
International in the index were introduced shares Bank of America and the oil company
Chevron. September 22, instead of shares of nationalized insurer AIG in the Dow Jones
Industrial Average had been included securities of Kraft Foods, the world's second-largest
manufacturer of food products, including chocolate.
The calculation of the index is now a few are now different from the original algorithm:
the price of shares during the fragmentation or integration is assigned a weighting
factor. The result is that the greater the value of shares, the more weight it has in the
index. The growth of expensive stocks is more significant for the index compared with the
change of shares of lesser value. Now a key role for the index calculation are shares of
IBM, are the most expensive.
All 30 modern companies represented in the index of Industrial Average is an
international, i.e. have offices around the world. Now the index did not accurately
reflect what actually happens in the U.S. economy, in contrast to, for example, from
another popular American index S & P-500. Thus, we can say that this index Dow Jones
Industrial Average is a "litmus test" for the entire world economy.
Indices are needed not only to investors in order to know which way to go market.
Thousands of funds geared to indexes when it makes its investment portfolio. In 1997,
based on the index, Dow Jones Industrial Index Fund was created Diamonds, whose shares are
equal to the value 1 / 100 DJIA index value 30. Index shares on the basis of index Dow
Jones Industrial Average (ticker symbol DIA) is a popular and a favorite tool of exchange
trade of many players due to the fact that the dynamics of its price is stable and
predictable.
However, the market happen sometimes unpredictable and improbable events. So in the
"Black Monday" on Oct. 19, 1987 First, there was the biggest in percentage terms
the index crash when the DJIA lost 22.6%. The reason for plummeting in one day has not
been fully elucidated so far. Nothing foreshadowed the collapse of the stock market
plummeting and caused shock and panic, not only for gamblers, but also in financial and
economic circles throughout the world. The cause of this event are trying to explain the
use of trading software, when deals are done automatically: program are done for sale
"at falling prices, reinforcing the bearish momentum. According to another version,
the index fall was precipitated by the actions of the U.S. financial leaders.
The maximum value of the index of DJIA = 14 166, 5 was observed on Oct. 9, 2007, then
began his decline, and March 6, 2009 the index reached its lowest level in a decade DJIA =
6470,1.
In the past two months DJIA has increased steadily, what pleases and inspires optimism:
perhaps the global crisis has already passed its apogee and, finally, recovery.