Business, Legal & Accounting Glossary
The Dow Jones Composite Average is a combination of the Dow Jones Industrial Average, Dow Jones Transportation Average, and Dow Jones Utility Average. The Dow Jones Composite Average includes a total of 65 companies (30 Industrial, 20 Transportation, 15 Utility). The Dow Jones Composite Average is intended to be a broad market index but unlike other popular broad indexes (i.e. S&P 500, Nasdaq Composite Index, Russell 2000 Index, etc.), the Dow Jones Composite Average is not a market capitalization-weighted index. The Dow Jones Composite Average is a price-weighted index quoted in points, not dollars. As a result, a small company with a high price will have a greater influence on the Dow Jones Composite Average than a larger company with a relatively low stock price. The Dow Jones Composite Average is calculated by summing the prices of each stock included in the Dow Jones Composite Average and dividing the sum by a divisor. The Dow Jones Composite Average includes all companies selected by the editors of the Wall Street Journal (WSJ) that make up the Dow Jones Industrial Average, the Dow Jones Transportation Average, and the Dow Jones Utility Average. Critics of the Dow Jones Composite Average contend that due to the fact that 20 stocks are transportation stocks and 15 are utility stocks, the Dow Jones Composite Average does not provide a true representation of the US economy. The editors of the WSJ also maintain and review the Dow Jones Composite Average.
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This glossary post was last updated: 9th February, 2020 | 0 Views.