How to Calculate the Dow
The Dow Jones Industrial Average, or the DJIA, or simply the Dow, is the most talked about and discussed financial index in the world. Created in 1896, and originally only the average of 11 components, the Dow today is composed of 30 components or publicly traded companies. To compute the "average" of the Dow is not a case of simply adding up the prices of the companies and dividing by 30. However, you can learn how to compute the "average" of the Dow Jones Industrial Average.
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Instructions
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Find the share prices of the 30 publicly-traded companies that compose the Dow. Current prices for the companies can be found at Google Finance, Yahoo! Finance, or other free financial sites. The 30 components are 3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Cisco Systems, Coca-Cola, DuPont, ExxonMobil, General Electric, Hewlett-Packard, The Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, Travelers, United Technologies, Verizon Communications, Wal-Mart, and Walt Disney.
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Add up the share prices of the 30 components. This will take some time if you are doing it with pencil and paper, but that is how it is done.
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Divide the share prices by the current (April 6, 2011) divisor, which is 0.132129493, and you will have the Dow Jones Industrial Average. Basically, a $1 move in any of the 30 components will result in a 7.6 move in the index.
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Tips & Warnings
It is a laborious process to perform so we can all be thankful that the current level of the DJIA is readily found on nearly every financial website.
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