History

• Business journalist Charles Henry Dow created the Dow Jones Industrial Average in 1896, averaging the stock prices of a dozen major industrial companies to serve as a performance benchmark for the stock market. The Dow average began at 40.94 and was the exact average of those 12 companies' stock prices.
  
  

Makeup

• The Dow Jones Industrial Average today monitors the progress of 30 leading U.S companies, selected at the discretion of The Wall Street Journal. Companies measured in the index, as of June 2009, included Johnson & Johnson, Microsoft, AT&T, Coca-Cola and General Electric, the only contemporary company that was included in Charles Henry Dow's original average.
  
  

Features

• Because of stock market complexities, the Dow Jones Industrial Average has not been a direct average of the companies' stock prices since 1928. Instead, Dow Jones maintains a divisor, and the Industrial Average is the sum of the 30 selected companies' stock prices divided by that divisor.
  
  

Divisor

• The divisor accounts for such activities as stock splits, when a company purposely lowers its stock price by multiplying the number of shares each shareholder owns. For example, if a company has a stock valued at $100 and does a 2-for-1 split, each shareholder would own twice as many shares at $50 each, even though the company's overall worth has not changed.
  
  

Example

• The divisor in June 2009 was 0.125552709. So when the Dow Jones Industrial Average dropped a single point at that time, it represented a drop of about 13 cents in the total sum of the stock prices of the 30 companies considered in the average.