The Dow Jones Index is one of the key indicators used to assess the state of the US economy. It is the oldest American stock index, which was created at the end of the 19th century.
Index calculation
In 1884, American financial analyst Charles Doe, together with his partner Edward Johnson, developed a composite indicator based on the share price of 11 of the largest American companies, of which two were industrial and nine were railroad. Soon, having finalized his concept, he began to publish his calculations in a small, two-page, business newspaper, which quickly gained popularity among New York financiers. Later, the Wall Street Journal, which still exists today, was published on its basis.
Thus, the first Dow Jones index was released in 1886: then it was based on stock quotes of 12 major industrial companies in the United States and was calculated as the arithmetic average of these indicators. As a result, the starting point for the Dow Jones index was a value of 40.94 points. Gradually, the number of components of the index increased: in 1916 it reached 20, and in 1928 - 30.
This number of companies is used to calculate the Dow Jones index today. However, of the first participants in the indicator, only one company remains today - General Electric. Its modern name is the Dow Jones Industrial Average, which in the international stock market is designated by the abbreviation DJIA, which is an abbreviation of the English-language name of the index - "Dow Jones Industrial Average". However, some of the companies whose stock quotes are used to calculate the index today do not actually belong to the industrial sector anymore.
Index dynamics
The Dow Jones index has long left its first value, just over 40 points. This was due to a significant increase in the value of shares of companies included in the calculation, as well as a revision of the original composition of the index. So, in 1966 the indicator for the first time reached a value exceeding 1000 points, in 1995 for the first time it exceeded 5000 points, and in 1999 - 10,000 points.
The maximum value of the index - 11728, 98 points - was recorded in 2000, which became one of the most successful for the American economy. The most significant drops in the history of the indicator were recorded in 1987, when on October 19, the shares of most American companies collapsed for no obvious reason, and in 2001, when the American stock market collapsed under the influence of news of the September 11 terrorist attack. Then, in one day, the value of the index fell by 22.6% and 7.1%, respectively.
