Replicating the Dow Jones Industrial Average

Jacky Lin, Genevieve C. Selden, John B. Shoven and Clemens Sialm

No 28528, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The Dow Jones Industrial Average has historically been the most quoted stock index in the United States. It has several unique features. It uses price weights, it ignores cash dividend payments, and it also treats stock dividends, rights issues, and other corporate actions inconsistently. We show that price indices which use alternative weighting methods and more systematic inclusion criteria perform similarly to the Dow. However, ignoring cash and stock dividends underestimates the long-run returns earned by stock market investors dramatically. If the DJIA had consistently adjusted for dividends and other corporate actions since 1928, the index would have closed at 1,113,047 instead of 28,538 points at the end of 2019.

JEL-codes: G10 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-fmk and nep-his
Note: AP
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