It is backward-compatible, because they adjust the divisor to compensate, so that the index value pre-rebalancing is the same as the index value post-rebalancing.
If they never adjusted the list of stocks, it would eventually become irrelevant as stocks go bankrupt or are acquired. Only 1 current Dow member was in the index in 1907 (GE), and 4 current Dow members were in the index before 1939 (XOM, PG, DD).
Comments
Multiply 30 prices by shares outstanding, and add, is not substantially harder computation to do once a day.
Changing ATT to AAPL isn't backward compatible.
What compatibility is there to maintain? Nothing important depends on the value of the DJIA from before last week.
It is backward-compatible, because they adjust the divisor to compensate, so that the index value pre-rebalancing is the same as the index value post-rebalancing.
If they never adjusted the list of stocks, it would eventually become irrelevant as stocks go bankrupt or are acquired. Only 1 current Dow member was in the index in 1907 (GE), and 4 current Dow members were in the index before 1939 (XOM, PG, DD).