The Dow Divisor is used to calculate the Dow Jones Industrial Average (DJIA) that you hear about on the news every night. A simple numerical value, the DJIA is obtained by adding up the prices of the Dow 30 stocks and dividing this figure by the Dow Divisor.
But what genius comes up with this Divisor? In an equation too complicated to be done by any entity except a computer, the divisor evolves over time and is based on stock splits, spinoffs, and other changes in the Dow 30. This helps to ensure that such changes do not skew the numerical value of the all-important DJIA.
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Finance: What is the S&P 500?45 Views
finance a la shmoop. what is the S&P 500? well the S&P 500 is just an index- that
is the standard and poors company assembled 500 stocks put them on a
spreadsheet- this was a spreadsheet in 1957 -and they tracked them. [spreadsheet pictured]
well the index had something like 37 shares of Procter & Gamble, the 23 shares
of Ford, 18 shares of IBM and so on. in the 1950s the S&P 500 totaled something
like 40 maybe 50 bucks on a good day. at the end of each day the elves who worked
inside of the S&P Factory, they would add up the shares basically ignore any
dividends and send to the press a total which was published to more or less
everyone who cared about investing. well not nearly even a century later the 40 [man reads newspaper]
to $50 reign to the SNP is today knock on the door of 2,500 .so without even
having dividends reinvested you'd have made 50 times your money with dividends
reinvested to buy more shares instead of keeping the cash to buy you know
groceries or electric massage slippers. you'd have made over 70 times your [grocery display case and slippers pictured]
original investment. welcome to America.
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