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More on Dow reshuffle
Posted By Barry Ritholtz On April 4, 2004 @ 4:04 am In Finance | Comments Disabled
A terrific explanation of the history of Dow, and the significance of the changes, courtesy of Briefing.com:
Dow Jones announced today the first changes to the Dow Jones Industrial Average in five years. While the DJIA is still the most well known market index, these changes render the index less important and it puts the final nail in the coffin of traditional Dow Theory. Inclusion in the index will still be, as it always has been, a kind of "honorary" emblem of significance, but the index as a whole becomes less important because of this change.
History of the Dow
An extensive history of the Dow Jones averages is fascinating, but beyond the scope of this article.
Instead, we offer a brief summary of major events in the index in the following table.
Date Event Comment 1884 Charles Dow publishes first list of "Dow Stocks" 11 stocks (9 railroads) which he said should be the primary focus of investors. 1886 First Dow list published with a summation of prices 12 stocks – 10 were railroads 1896 Dow list split into two lists: Railroad Index and Industrial Index Railroad Index later became Transportation Index 1907 General Electric added Bumped Tennessee Coal & Iron
Longest lasting stock in the index
1916 American Telephone & Telegraph added Bumped today October 1928 Industrial Average set to 30 stocks and a divisor introduced. Divisor attempts to compensate for stocks with larger prices unduly affect the overall average October 1929 Utility Average Introduced Introduced same month as the great crash. July 1930 Eastman Kodak Added Bumped today July 1956 International Paper Added Bumped today
An excellent 14 page summary of all changes to the Dow Indexes over the years can be obtained from: http://www.djindexes.com/downloads/DJIA_Hist_Comp.pdf
Changes In The Dow
Today’s change adds the following stocks to the Dow Jones Industrial Average:
Stock Added Industry Added Stock Removed Industry Removed American International Group Insurance International Paper Paper goods Pfizer Major Drugs Eastman Kodak Photographic equipment Verizon Telecommunications AT&T Telecommunications
None of the stocks added could be said to produce anything "industrial."
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