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Replicating the Dow Jones Industrial Average

NBER Working Paper Series, 2021-03

Copyright National Bureau of Economic Research, Inc. Mar 2021 ;ISSN: 0898-2937 ;DOI: 10.3386/w28528

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  • Title:
    Replicating the Dow Jones Industrial Average
  • Author: Selden, Genevieve C ; Sialm, Clemens ; Shoven, John B ; Lin, Jacky
  • Subjects: Asset Pricing ; Dividend distributions ; Dividends ; Dow Jones averages ; Rates of return ; Securities markets ; Stock exchanges
  • Is Part Of: NBER Working Paper Series, 2021-03
  • Description: The Dow Jones Industrial Average has historically been the most quoted stock index in the United States. It has several unique features. It uses price weights, it ignores cash dividend payments, and it also treats stock dividends, rights issues, and other corporate actions inconsistently. We show that price indices which use alternative weighting methods and more systematic inclusion criteria perform similarly to the Dow. However, ignoring cash and stock dividends underestimates the long-run returns earned by stock market investors dramatically. If the DJIA had consistently adjusted for dividends and other corporate actions since 1928, the index would have closed at 1,113,047 instead of 28,538 points at the end of 2019.
  • Publisher: Cambridge: National Bureau of Economic Research
  • Language: English
  • Identifier: ISSN: 0898-2937
    DOI: 10.3386/w28528
  • Source: Alma/SFX Local Collection
    ProQuest Central
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