The Dow Jones Industrial Average (DJIA) is the most widely published and best known stock market indicator in the world. The DJIA appears daily in nearly every major newspaper around the globe, is discussed on all financial newscasts, and is understood by most to be a leading indicator of the state of the economy. When the DJIA is rising, the U.S. economy is generally healthy and when the DJIA crashes, a recession is usually on the horizon.
Although most Americans have heard of the DJIA, it is amazing how few actually know how it is calculated or exactly what it means. Do you? For this assignment, you will research and write a paper about the calculation, composition, and history of the Dow Jones Industrial Average. To facilitate your research, begin by investigating the wealth of information available on the Dow Jones website at:
Click and read the links for Overview, Components, Editorial, Calculation, Milestones, and Learning Center. In the Learning Center, be sure to read some of the Decade Articles associated with the different time periods in the graph.
After you learn about the DJIA from the Dow Jones website, find and read at least two scholarly articles discussing the index. Then write a well-structured paper about the index. Your goal is to explain the index and its history in simple and straightforward terms to someone with little or no background in finance or business. Additionally, critically evaluate the DJIA in light of the fact that it is a price weighted index (as opposed to a more robust value weighted measure like the S&P 500 Index) and it is comprised of such a limited number of the over 2800 different company stocks that trade on the New York Stock Exchange (NYSE).