Skip to main content Skip to Search Box

Definition: Dow-Jones average from Collins English Dictionary

n

1 US a daily index of stock-exchange prices based on the average price of a selected number of securities

[C20: named after Charles H. Dow (died 1902) and Edward D. Jones (died 1920), American financial statisticians]


Summary Article: Dow Jones Average
From The Columbia Encyclopedia

indicators used to measure and report value changes in representative stock groupings on the New York stock exchange. There are four different averages—industrial stocks, transportation stocks, utility stocks, and a composite average of all three. The index was started in 1884 by Charles Dow (1851–1902) and Edward Davis Jones (1856–1920) as an average consisting mostly of railroad stocks. In 1896, Dow Jones created the industrial average (with 12 stocks) and separated the railroad stocks into a separate average (renamed the transportation index in 1970); daily publication of the average began in the Wall Street Journal later that year. The industrial average expanded to 20 stocks (1916) and then 30 (1928); the average still lists 30 stocks, but the companies have changed through the years as American industry itself has grown and changed. The utilities average was started in 1929.

Although the industrial average is the most frequently cited, it has been criticized for consisting of only blue-chip stocks and for its inability to adjust accurately—in spite of a sophisticated mathematical formula—for dividends and stock splits; some analysts feel that other indexes, such as the Standard & Poor's 500, are more accurate reflections of market activity. The average is quoted in points, not in dollars; in 1896, the industrial average was at 40.94 points. In 1972 the average passed 1,000, and in 1999 it closed above 10,000. The industrial average is often taken as an indicator of the stock market's growth or shrinkage (and thus the strength or weakness of the U.S. economy). In 1929 the average dropped more than 12%, reflecting the crash of the stock market and the start of the Great Depression; in the “crash” of 1987 the average dropped more than 22%. Other Dow Jones averages include the Dow Jones 20 Bond Average, the Dow Jones Municipal Bond Yield Average, and the Dow Jones Internet Indexes.

The Columbia Encyclopedia, © Columbia University Press 2018

Related Articles


Full text Article Dow Jones Index
Encyclopedia of Business in Today's World

Dow Jones Index, also known as the Dow Jones Industrial Average (DJIA), or often simply the Dow 30 Industrials, is a price-weighted average of...

Full text Article Dow Jones Industrial Averages (DJIA)
Dictionary of Economics, Wiley

Also called the blue chip index ; a price-weighted average of 30 blue chip stocks, actively traded in the New York Stock Exchange. DJIA is...

Full text Article DJIA
Collins Portuguese Dictionary

(US) n abbr ( STOCK EXCHANGE ) = Dow Jones Industrial Average ...

See more from Credo