The DJIA ignores market cap and just uses share price. So, # of outstanding shares has no effect. Stock splits do not count as changes in share price though.
Your wrong.
The DJIA ignores market cap and just uses share price.
I'm fairly certain I made no claims this was how the DJI currently behaved -- I was making the point that a better market valuation could be achieved by examining the market cap in addition to share price.
Uhh, sorry no idea how else to parse what you wrote. Could you clarify?
In response to "> A dollar change to an $800 stock affects the DJIA just as much as a dollar change tn a $30 stock so the DJIA is nearly meaningless." You say "You'd have to look at how many outstanding shares there are. ..."
Edit: Unless you assumed they meant 1$ change in market cap, but as he was actually discribing the way the DJIA works assing he was wrong if you know how it works seems odd.
PS: Sure, we can make a new index using different math, but at that point were simply talking about something else not the DJIA. What's really surprizing is how useful the DJIA is as a simple indecator of market trends that never get's that big. IMO, 1000 * Log(market basket of stocks) might be just as handy, but they pick stocks in part as good proxy for the ecnomy so the DJIA is more useful than you might think.
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Your wrong.
The DJIA ignores market cap and just uses share price. So, # of outstanding shares has no effect. Stock splits do not count as changes in share price though.
"To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor." The Dow Divisor was 0.15571590501117 on September 27, 2013. http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Ca...
"Presently, every $1 change in price in a particular stock within the average, equates to a 6.42 (1/0.15571590501117) point movement."
I'm fairly certain I made no claims this was how the DJI currently behaved -- I was making the point that a better market valuation could be achieved by examining the market cap in addition to share price.
Uhh, sorry no idea how else to parse what you wrote. Could you clarify?
In response to "> A dollar change to an $800 stock affects the DJIA just as much as a dollar change tn a $30 stock so the DJIA is nearly meaningless." You say "You'd have to look at how many outstanding shares there are. ..."
Edit: Unless you assumed they meant 1$ change in market cap, but as he was actually discribing the way the DJIA works assing he was wrong if you know how it works seems odd.
PS: Sure, we can make a new index using different math, but at that point were simply talking about something else not the DJIA. What's really surprizing is how useful the DJIA is as a simple indecator of market trends that never get's that big. IMO, 1000 * Log(market basket of stocks) might be just as handy, but they pick stocks in part as good proxy for the ecnomy so the DJIA is more useful than you might think.
Bad start!
It would be a bad start if he was criticizing the guy's spelling or grammar, but a minor such error in a substantive disagreement is unimportant.
No, that would just mean that the mistake was ironic. Even when not ironic, this particular issue is distracting enough that it's worth correcting.