DJIA is calculated not as a weighted arithmetic index of the stock market. It means that the company capitalization is not taken into account but the value of all included stocks are summed up. However, instead of dividing the resulting number into the number of companies, it is divided into a special ratio, which is called ‘divisor’. They started to use it to avoid confusion due to the stock split and consolidation.
- Initially, there were 12 companies in total and there are 30 of them today.
- Stocks with the highest prices have a bigger influence on price fluctuations of the index itself.
- None of the companies can take more than 15% of the index.
The index has changed more than 60 times during the whole time of its existence. A special committee rebalances the index.
Rebalancing takes place in the event of:
- global economic changes;
- a sharp fall / growth of a company capitalization.
The next screenshot shows a list of companies, which constitute the index as of the end of 2020. See Picture 2.