How is the DJIA determined?

Now that Portfolio Bunny has explained what the Dow Jones Industrial Average is, the question is: How is that average determined?

Logic would dictate you average out all the stocks, divide, multiply, and so forth. WRONG!

Some people might think each stock would have an equal weight in the index. That would make sense, even to Portfolio Bunny. But... it's WRONG.

There are some indices that are weighted by market capitalization. Meaning the larger companies with more stock are given a greater weight in the index. For example: a company like GE would cause an index to move 10x more than a company 10x smaller. WRONG AGAIN!

So, how is the DJIA determined? Come on. Make a guess and send it to Bunny. You might even get it right!

But, in case you can't figure this one out on your own, stay tuned and Portfolio Bunny will give you the answer tomorrow.