Examining the dow jones as a financial index

The Dow Jones Industrial Average besides referred to as the Industrial Average, the Dow Jones, the Dow 30, or merely as the Dow ; is one of several stock market indices, created by Wall Street Journal editor and Dow Jones & A ; Company co-founder Charles Dow. The norm is named after Dow and one of his concern associates, a statistician, Edward Jones. It is an index that shows how certain big, publicly-owned companies have traded during a standard trading session in the stock market. Dow compiled the index to estimate the public presentation of the industrial sector within the American economic system. However, the public presentation of the Dow continues to be influenced by non merely corporate and economic studies, but besides by domestic and foreign political events such as war and terrorist act, every bit good as by natural catastrophes that could potentially take to economic injury. It is the second-oldest U.S. market index after the Dow Jones Transportation Average, which Dow besides created. The norm is computed from the Dow Jones Indexes by the stock monetary values of 30 of the largest and most widely held public companies in the United States. The Industrial part of the name is mostly historical, as many of the modern 30 constituents have small or nil to make with traditional heavy industry. The norm is price-weighted, and to counterbalance for the effects of stock splits and other accommodations, it is presently a scaly norm. The value of the Dow is non the existent norm of the monetary values of its constituent stocks, but instead the amount of the constituent monetary values divided by a factor, which changes whenever one of the constituent stocks has a stock split or stock dividend, so as to bring forth a consistent value for the index.

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Along with the NASDAQ Composite, the S & A ; P 500 Index, and the Russell 2000 Index, the Dow is among the most closely-watched benchmark indices tracking targeted stock market activity. Components of the Dow trade on both the NASDAQ OMX and the NYSE Euronext, two of the largest stock market companies. Derived functions of the Dow trade on the Chicago Board Options Exchange and through the CME Group, the universe ‘s largest hereafters exchange company.

Companies included in the dow Joness

The Dow Jones consists of the following 30 companies:

CompanyA

SymbolA

IndustryA A

3M

MMM

Pudding stone

Alcoa

Aa

Aluminum

American Express

AXP

Consumer finance

AT & A ; T

Thymine

Telecommunication

Bank of America

BAC

Banking

Boeing

Barium

Aerospace and defence

Caterpillar

Cat

Construction and excavation equipment

Chevron Corporation

CVX

Oil & A ; gas

Cisco Systems

CSCO

Computer networking

Coca-Cola

KO

Beverages

DuPont

Doctor of divinity

Chemical industry

ExxonMobil

XOM

Oil & A ; gas

General Electric

GE

Pudding stone

Hewlett-Packard

HPQ

Technology

The Home Depot

HD

Home betterment retail merchant

Intel

INTC

Semiconductors

IBM

IBM

Computers and engineering

Johnson & A ; Johnson

JNJ

Pharmaceuticals

JPMorgan Chase

JPM

Banking

Kraft Foods

KFT

Food processing

McDonald ‘s

MCD

Fast nutrient

Merck

MRK

Pharmaceuticals

Microsoft

MSFT

Software

Pfizer

PFE

Pharmaceuticals

Procter & A ; Gamble

PG

Consumer goods

Travelers

TRV

Insurance

United Technologies Corporation

UTX

Pudding stone

Verizon Communications

VZ

Telecommunication

Wal-Mart

WMT

Retail

Walt Disney

Dis

Broadcast medium and amusement

SENSEX

For the premier Stock Exchange that pioneered the stock broking activity in India, 128 old ages of experience seems to be a proud milepost. A batch has changed since 1875 when 318 individuals became members of what today is called ‘The Stock Exchange, Mumbai ‘ by paying a deluxe sum of Re.1/- .

Since so, the state ‘s capital markets have passed through both good and bad periods. The journey in the twentieth century has non been an easy one. Till the decennary of 1880ss, there was no graduated table to mensurate the ups and downs in the Indian stock market. The Stock Exchange, Mumbai ( BSE ) in 1986 came out with a stock index that later became the barometer of the Indian stock market.

SENSEX is non merely scientifically designed but besides based on globally accepted building and reappraisal methodological analysis. First compiled in 1986, SENSEX is a basket of 30 constitutional stocks stand foring a sample of big, liquid and representative companies. The basal twelvemonth of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print every bit good as electronic media.

The Index was ab initio calculated based on the ‘Full Market Capitalization ‘ methodological analysis but was shifted to the free-float methodological analysis with consequence from September 1, 2003. The ‘Free-float Market Capitalization ‘ methodological analysis of index building is regarded as an industry best pattern globally. All major index suppliers like MSCI, FTSE, STOXX, S & A ; P and Dow Jones use the Free-float methodological analysis.

Due to is broad credence amongst the Indian investors ; SENSEX is regarded to be the pulsation of the Indian stock market. As the oldest index in the state, it provides the clip series informations over a reasonably long period of clip ( From 1979 onwards ) . Small admiration, the SENSEX has over the old ages become one of the most outstanding trade names in the state.

The growing of equity markets in India has been phenomenal in the decennary gone by. Right from early 1890ss the stock market witnessed heightened activity in footings of assorted bull and bear tallies. The SENSEX captured all these events in the most judicial mode. One can place the roars and flops of the Indian stock market through SENSEX.

List of BSE SENSEX 30 companies

NameA A

SectorA A

Air combat command

Housing Related

Ambuja Cements Ltd

Housing Related

Bajaj Auto

Conveyance Equipments

BHEL

Capital Goods

Bharti Airtel

Telecommunication

Cipla

Healthcare

Dr. Reddy ‘s Laboratories**

Healthcare

Grasim Industries

Diversified

HDFC

Finance

HDFC Bank

Finance

Hindalco Industries

Metal, Metal Products & A ; Mining

Hindustan Lever Limited

FMCG

ICICI Bank

Finance

Infosys

Information Technology

ITC Limited

FMCG

Larsen & A ; Toubro

Capital Goods & A ; Construction.

Mahindra & A ; Mahindra Limited

Conveyance Equipments

Maruti Udyog

Conveyance Equipments

NTPC

Power

ONGC

Oil & A ; Gas

Ranbaxy Labs

Healthcare

Reliance Communicationss

Telecommunication

Reliance Energy

Power

Reliance Industries

Oil & A ; Gas

Satyam Computer Services

Information Technology

States Bank of India

Banking & A ; Finance

Tata Consultancy Services

Information Technology

Tata Motors

Conveyance Equipments

Tata Steel

Metal, Metal Products & A ; Mining

Wipro

Information Technology

“ Dow V sensex ”

Though Dow and sensex have same 30 stocks, the methodological analysis to cipher Dow is different as compared to sensex. sensex is calculated on the footing of market capitalisation weighted method with different companies holding different weightage harmonizing to their market capitalisation. But Dow has a equal weightage to all 30 companies which means a more unvarying method of computation.

Lashkar-e-taibas take an illustration: –

if infosys or BHEL goes up by 10 % on a one peculiar twenty-four hours sensex will be winging high irrespective of how other stocks are executing because these stocks have a good weightage in sensex and that is what has been go oning for past 4,5 months. FIIs and local common financess have been trailing some 100 companies which form an of import portion in sensex and has led sensex rocketing past 11000. This is non basically the market sentiment with many of little cap stocks hitting their low in past 9 months. Adding to the sarcasm all the non index stocks have negative returns.

But Dow has a better method of computation of its index, with a consistent rise even if one or two stocks fairing extremely it ‘s equal weightage method gives more accurate consequences every bit far as index is concerned.

since there is no standard to change over leaden index to uniformly distributed or vice-versa, comparing sensex and Dow will be stupidity, merely to fulfill some inane heads of stock agents misdirecting public.

sensex can decidedly be compared in footings of returns on which it is manner behind Dow in absolute footings, sing last twelvemonth returns sensex registered a growing of 40 % with Korea composite index 53 % and other index of developing states fairing rather good in high 30s.

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