Having learned about The Dow Jones Average, The Dow Jones Average Kinds and the Dow Jones Average history, you may have learned a lot about the negative sides of this average.

Despite all of the negative factors of the Dow Jones Average, it still remains one of the most popular indexes. The reason for such popularity of the index that it simply works. Since the earliest times of its application in 1986, this index reflected the general trends of the stocks market dynamics. The index reflects the rise and the fall of stocks prices with the same accuracy that a highly reliable S&P 500. In 95 cases of 100 the results of the two indexes correspond to each other.

Dow has one positive side more. It’s easy to understand for anybody. The basic principle is adding all of the prices and than dividing them. The mechanism of work is the same all time long with the divider changing from time to time. The Dow Jones index calculation that remained stable during long years changed for the first time in 1982. The change was provoked by industrial changes – stocks split, and some stocks substitution plus some other factors that changed the market face considerably. Since than the index has been gradually changing all the time.

Most of other averages are weighed before the capitalization which means that the changing company price is multiplied by its side (capitalization). As a result, the smallest companies effect the market most. The Dow Jones index is weighed only in terms of company cost. Here a price change of a small company has the same weigh that a price change of a large one. Which of the two approaches is the most correct? The experts haven’t yet reached the agreement over this question.