RT Journal Article
SR Electronic
T1 Deconstructing the Dow Jones Industrial Average
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 120
OP 142
DO 10.3905/jwm.2022.1.188
VO 25
IS 3
A1 Jacky Lin
A1 Genevieve Selden
A1 John B. Shoven
A1 Clemens Sialm
YR 2022
UL https://pm-research.com/content/25/3/120.abstract
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.