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Dow Jones Industrial Average
The Dow Jones Industrial Average was created on May 26, 1986, and named after Charles Dow, nineteenth century Wall Street Journal editor and co-founder of Dow Jones & Company. At that time, there were only twelve stocks in the index, representing the industrial component of America's stock markets.
Today, the average consists of 30 of the largest and most widely held public companies in the United States, representing the most important industries, and not just the heavy industries. Component stocks are selected by the editors of the Wall Street Journal and are occasionally changed along with market conditions.
The Dow, as it is informally called, is a price weighted index, meaning that the index is a simple average of the total price of the component stocks, and its initial value was 40.94. As time goes by, to compensate for the effects of stock splits and other adjustments, the divisor was reduced gradually over time, and today the divisor is a number less than one. As a result, the Dow Jones Industrial Average today stands above 10,000 and heading higher.