Determining the DJIA - Who or What is Responsible?!

Alright, you were asked to figure out how the DJIA is determined. What was your guess? Let's see if you were right...

The Dow Jones Industrial Average is unique in that it is a price-weighted average. That means the higher priced stocks move the index a greater amount than the lower priced stocks.

But what does that mean?

If a company's stock is selling at $90 a share, and a different stock is selling at $45 a share, the higher priced stock will move the index more than the lower priced stock. However, one of the many flaws in this type of system is quickly revealed when that $90 stock splits 3-1 and is now selling at $30 a share. The stock then moves the index less than the $45 stock. Do you think that makes sense? Of course not!

Big news (all the time) - the Dow hit a new high! But what does that mean? Did all 30 stocks high new highs? Did most of them?

Won't you be surprised... stay tuned...