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The Dow Jones Industrial Average (DJIA) is an indicator used in the stock market that gauges the performance of 30 significant publicly traded businesses that are listed on the NYSE and NASDAQÂ Stock Market. One of the oldest and most well-known stock market indices in the world, the DJIA was established in 1896 by Charles Dow and Edward Jones.
The general condition of the American stock market and the larger economy are frequently gauged using the DJIA. The Wall Street Journal's editors, who choose the 30 companies that make up the index, try to represent a variety of sectors, including banking, technology, retail, and healthcare. The most well-known businesses represented by the DJIA include Apple Inc., Microsoft Corp., Goldman Sachs Group Inc., and Coca-Cola Co.
Because the DJIA is a price-weighted index, the stock prices of the 30 businesses are totaled up and then divided by a factor that takes stock splits, dividends, and other corporate actions into account. The result of this calculation is the value of the index, which is presented as points rather than percentages.
When evaluating the performance of their own portfolios or specific equities, investors and analysts sometimes use the DJIA as a benchmark. However, some detractors contend that the DJIA is an outmoded and inaccurate indicator of the success of the stock market since it only tracks a small number of companies and is disproportionately biased toward higher-priced stocks.
Notwithstanding these complaints, the DJIA continues to be a widely used and highly followed indicator of the performance of the U.S. stock market, and changes in it can have a big impact on investor sentiment and broader societal trends.
