There are different types of Dow Jones Averages. These are the Dow Jones Industrial Average, or DJIA, the Dow Jones Transportation Average (DJTA), the Dow Jones Utility Average (DJUA), and the Dow Jones Composite Average (DJCA).
The Dow Jones Industrial Average, otherwise known as the DOW, is, although not the oldest, the most well-known among these. Like any other market average, it provides information on the status of stocks being traded on the market. It is common knowledge that whenever the economy is in good condition, prices of stocks tend to be higher, as well. Should the value of the stock decrease during a strong economic period, or should its condition be different from the market condition as a whole, investors should take notice and make decisions as the events dictate.
More specifically, though, the DJIA is based on the value of 30 large stocks in the United States. These are industrial companies, although not necessarily involved in heavy industries, which are generally perceived to be both stable and reliable. Exxon and General Motors are just a couple of companies which possess this caliber. The value of these companies is price-weighted and averaged following a specific formula. The method used to compute for this is meant to take into account any adjustments as well as the effects of stock splits, if there are any. The divisor in the equation therefore changes in the event of a stock split in one of the included corporations.
The Dow Jones Industrial Average may also be called Dow 30, or simply referred to as the Dow.
