Comments on: Bianco: The Dow is Distorted http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 19:17:10 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: jonathanikatz http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-147260 jonathanikatz Fri, 20 Feb 2009 17:56:49 +0000 http://www.ritholtz.com/blog/?p=17137#comment-147260 All the criticism of the Dow is valid. But the S&P500 and NYSE indices track it very closely. Empriically, it works. All the criticism of the Dow is valid. But the S&P500 and NYSE indices track it very closely. Empriically, it works.

]]> By: KidDynamite http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141990 KidDynamite Tue, 27 Jan 2009 19:02:05 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141990 good post - and you didn't even mention how absolutely absurd it is to have a price weighted index in the first place... it seems like it shouldn't be that hard to convince the monkeys on CNBC that the DOW is irrelevant good post – and you didn’t even mention how absolutely absurd it is to have a price weighted index in the first place…

it seems like it shouldn’t be that hard to convince the monkeys on CNBC that the DOW is irrelevant

]]> By: cognos http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141891 cognos Tue, 27 Jan 2009 08:39:02 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141891 This is a really excellent post. Now for the last time Grandpa, lets start talking S&P500. Just think of it like the Dow divided by 10. This is a really excellent post.

Now for the last time Grandpa, lets start talking S&P500.

Just think of it like the Dow divided by 10.

]]> By: dunnage http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141861 dunnage Tue, 27 Jan 2009 04:06:01 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141861 Hey, how about Wachovia and Studebaker? Hey, how about Wachovia and Studebaker?

]]> By: dunnage http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141859 dunnage Tue, 27 Jan 2009 04:03:57 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141859 I have a question. Be happy to blame a committee, in this case the Index committee, cause it's a bunch of folks and committee has Ms and Ts and Es galore making me feel as thought I were actually proficient at typing. But -- as you then do as they should of done -- tell me your picks to replace Citi, GM, BAC in the Dow restoring the proper weightings in financials and autos? I have a question. Be happy to blame a committee, in this case the Index committee, cause it’s a bunch of folks and committee has Ms and Ts and Es galore making me feel as thought I were actually proficient at typing.

But — as you then do as they should of done — tell me your picks to replace Citi, GM, BAC in the Dow restoring the proper weightings in financials and autos?

]]> By: Mr.Sparkle http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141749 Mr.Sparkle Mon, 26 Jan 2009 18:03:36 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141749 Echo the above sentiment. I've long tracked this via Excel and noticed this phenomenon back when GM and AIG had their woes. I even put up a little table of the DJI component weights a week ago to illustrate the problems with the DJI weighting system. It becomes even more obvious today when a company like CAT releases bad earnings and drops the index more than BAC and C both being down by far larger margins. And CAT is as close to an "average" weight DJI component as you can get at about 3.2%. Echo the above sentiment.

I’ve long tracked this via Excel and noticed this phenomenon back when GM and AIG had their woes. I even put up a little table of the DJI component weights a week ago to illustrate the problems with the DJI weighting system. It becomes even more obvious today when a company like CAT releases bad earnings and drops the index more than BAC and C both being down by far larger margins. And CAT is as close to an “average” weight DJI component as you can get at about 3.2%.

]]> By: zachstocks http://www.ritholtz.com/blog/2009/01/bianco-the-dow-is-distorted/comment-page-1/#comment-141700 zachstocks Mon, 26 Jan 2009 14:44:59 +0000 http://www.ritholtz.com/blog/?p=17137#comment-141700 Very interesting observation. This means that a 7.5% move in IBM is just as important as BOTH Citi and GM going out of business. At the same time if many of the low price companies DOUBLE it has little effect on the average. Another good reason to not like price weighted indices (or maybe a good reason for the committee to stay on top of its game) <a href="http://zachstocks.com" rel="nofollow">Zach</a> Very interesting observation. This means that a 7.5% move in IBM is just as important as BOTH Citi and GM going out of business.

At the same time if many of the low price companies DOUBLE it has little effect on the average.

Another good reason to not like price weighted indices (or maybe a good reason for the committee to stay on top of its game)

Zach

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