Dow Jones Industrial Average

'The Dow' as it's fondly known, is the longest established of all share indices and has been the 'role model' for some of the world's other leading indices such as the Nikkei 225 in Tokyo.

The index, calculated 'minute by minute' is published by Dow-Jones & Co and can trace its origins back to 1897 - it was first calculated using just twelve stocks.

Today's 30 constituents are chosen by Dow Jones and the Wall Street Journal to represent a balanced selection of blue-chips.

In recent years, the constituents have been gradually altered, to reflect the shift in the US economy away from traditional manufacturing towards computers and service industries.

The index is a price-weighted one. So, like the Nikkei in Tokyo, a move in the share price of a company of relatively modest size may have as great an influence on the day's price movements as a comparable move in the price of a large one.

In the case of the Dow, however, this factor is mitigated by the selection of very large companies, and by the tendency for US companies to manage the nominal value of their shares so as to ensure market prices that fall into a roughly comparable range, between $30 and $100.

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Last Updated: June 2007 © Moneyextra.com

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