PT  - JOURNAL ARTICLE
AU  - Jacky Lin
AU  - Genevieve Selden
AU  - John B. Shoven
AU  - Clemens Sialm
TI  - Deconstructing the Dow Jones Industrial Average
AID  - 10.3905/jwm.2022.1.188
DP  - 2022 Oct 31
TA  - The Journal of Wealth Management
PG  - 120--142
VI  - 25
IP  - 3
4099  - https://pm-research.com/content/25/3/120.short
4100  - https://pm-research.com/content/25/3/120.full
AB  - The Dow Jones Industrial Average (DJIA) has historically been the most recognized 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 that use alternative weighting methods and more systematic inclusion criteria perform similarly to the DJIA. 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.