Word: divisor
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Dates: during 1960-1969
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...being divided by the number of stocks. In its first year (1896), the prices added up to $491, which was divided by twelve, the number of industrials then listed, to yield an average of 40.94. Over the years, the number of stocks listed rose to 30, but not the divisor. In fact, each time a split or stock dividend occurred, the divisor was lowered, otherwise the Dow would have dropped abruptly without a corresponding decline in the stocks' intrinsic worth...
Critics argue that the Dow-Jones is inflated, exaggerated and inaccurate-and they are partly right. It is the sum of only 30 selected stocks, ranging alphabetically from Allied Chemical to Woolworth; that sum is then divided by a divisor (currently 2.245) to adjust for past stock splits and dividends. Not only is the Dow a severely limited gauge of the 1,625 stocks on the Big Board, but it gives undue power to higher-priced stocks. Example: Du Pont is only one-sixth the size of General Motors, but carries more than twice as much weight...
...Jones average and the dollars-and-cents meaning of those changes. The Dow-Jones index is calculated by totaling the per-share value of 30 blue-chip industrial stocks (among them: A.T. &T., Du Pont, General Motors, General Electric, U.S. Steel), then dividing the sum by a frequently changed divisor-now 2.278-to erase the effect of stock splits and dividends. Thus figured, the Dow-Jones average of those 30 stocks stood at 888.82 at week's end, but their average market price was $67.50. Complained The Exchange: "A one-point change in the D-J equals about...