I don't think this is true -- the index rises in proportion to the stock's price. The stock price of company A would have to rise $26.66~ to incur the same index increase as company B.
It does ignore market cap though. So if company A's market cap was $800M but company B's market cap was $3M, and the shares rise as I explained, they'd still have the same impact on the DJIA. That's why it's flawed.
However, it's a really good indicator of investment performance. Just not necessarily market or economic performance.
It is 100% true. The way the DJIA is computed is by summing the share prices of each of the 30 constituents and then dividing by a magic constant (the divisor). When you think about it this way it's obvious that a $1 increase in share price for any of the constituents will have exactly the same impact on the value of the DJIA.
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I don't think this is true -- the index rises in proportion to the stock's price. The stock price of company A would have to rise $26.66~ to incur the same index increase as company B.
It does ignore market cap though. So if company A's market cap was $800M but company B's market cap was $3M, and the shares rise as I explained, they'd still have the same impact on the DJIA. That's why it's flawed.
However, it's a really good indicator of investment performance. Just not necessarily market or economic performance.
I don't think this is true
It is 100% true. The way the DJIA is computed is by summing the share prices of each of the 30 constituents and then dividing by a magic constant (the divisor). When you think about it this way it's obvious that a $1 increase in share price for any of the constituents will have exactly the same impact on the value of the DJIA.
Ah, my understanding was flawed then. Sorry to spread misinformation!