The Dow is Distorted

I always assumed that the Dow was weighted by market capitalization, with the whole thing scaled appropriately when companies were swapped in and out. But no…

The Dow is Distorted

The Dow Jones Industrial Average (DJIA) is a price weighted index. The divisor for the DJIA is 7.964782. That means that every $1 a DJIA stock loses, the index loses 7.96 points, regardless of the company’s market capitalization. …

This has perverse consequences. Read the whole thing.

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