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The importance of Dow Jones Industrial (DJIA) and statistics of best and worst years

October 17, 2008 by dragon 

The Dow, the oldest continuing U.S. market index, is a way of measuring the combined stock values of 30 big U.S. companies. It's one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

COMPUTATION 

The computation for the index is derived from a mathematical formula to adjust for things like stock splits — when a company changes the number of shares its stockholders have and adjusts the price — or new companies being added or removed. The idea is to keep the index consistent over time, and to make sure today's value can be compared in a meaningful way to what it was a year ago or 10 years ago.

This can be done various ways mathematically, but at Dow Jones it is handled by changing the "divisor" — a number that is divided into the total of the stock prices. That divisor currently stands at 0.1255527090.

COMPOSITION 

The 30 dow components as of now include: 3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, ExxonMobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon Communications, Wal-Mart and Walt Disney.

When it was first published, the index stood at 40.94

INDEX HISTORY 

What were removed and replaced: On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Sears Roebuck, and Union Carbide were removed from the DJIA and replaced by Intel, Microsoft, Home Depot, and SBC Communications. Intel and Microsoft became the first two companies traded on the NASDAQ exchange to be listed in the DJIA. On April 8, 2004, another change occurred as International Paper, AT&T, and Eastman Kodak were replaced with Pfizer, Verizon, and AIG. On December 1, 2005, AT&T returned to the DJIA as a result of the SBC Communications and AT&T merger. Altria Group and Honeywell were replaced by Chevron and Bank of America on February 19, 2008. On September 22, 2008, Kraft Foods replaced American International Group in the index.

IMPORTANCE

It has been a widely followed indicator of the stock market and overall health of the economy since October 1, 1928. Some on Wall Street downplay the importance of the average because it isn't as broad a measure as counterparts like the Standard & Poor's 500 index, which reflects the performance of 500 companies' stocks.

Analysts generally believe it is a useful tool when combined with other market indicators, including the S&P 500 and the Nasdaq index.

SOME INTERESTING STATISTICS

There are two ways to measure: index points and percentage change. Here are tables of the biggest one-day rises in both terms.
Days with Greatest Net Gain
RankDateCloseNet Chg.% Chg.
110/13/20089387.61       936.42         11.08         
203/16/200010630.60       499.19         4.93         
307/24/20028191.29       488.95         6.35         
409/30/200810850.66       485.21         4.68         
507/29/20028711.88       447.49         5.41         
603/18/200812392.66       420.41         3.51         
703/11/200812156.81       416.66         3.55         
809/18/200811019.69       410.03         3.86         
904/05/20019918.05       402.63         4.23         
1010/16/20088979.26       401.35         4.68         
Days with Greatest Percentage Gain
RankDateCloseNet Change% Change
103/15/193362.10       8.26         15.34         
210/06/193199.34       12.86         14.87         
310/30/1929258.47       28.40         12.34         
409/21/193275.16       7.67         11.36         
510/13/20089387.61       936.42         11.08         
610/21/19872027.85       186.84         10.15         
708/03/193258.22       5.06         9.52         
802/11/193278.60       6.80         9.47         
911/14/1929217.28       18.59         9.36         
1012/18/193180.69       6.90         9.35         

 

There are two ways to measure: index points and percentage change.
Here are tables of the biggest one-day declines in both terms.

Days with Greatest Net Loss

RankDateCloseNet Change% Change
109/29/200810365.45       -777.68       -6.98       
210/15/20088577.91       -733.08       -7.87       
309/17/20018920.70       -684.81       -7.13       
410/09/20088579.19       -678.91       -7.33       
504/14/200010305.77       -617.78       -5.66       
610/27/19977161.15       -554.26       -7.18       
708/31/19987539.07       -512.61       -6.37       
810/07/20089447.11       -508.39       -5.11       
910/19/19871738.74       -508.00       -22.61       
1009/15/200810917.51       -504.48       -4.42       
1109/17/200810609.66       -449.36       -4.06       
1203/12/200110208.25       -436.37       -4.10       
1302/27/200712216.24       -416.02       -3.29       
1406/06/200812209.81       -394.64       -3.13       
1507/19/20028019.26       -390.23       -4.64       
1608/09/200713270.68       -387.18       -2.83       
1709/20/20018376.21       -382.92       -4.37       
1810/12/200010034.58       -379.21       -3.64       
1903/07/20009796.03       -374.47       -3.68       
2009/22/200811015.69       -372.75       -3.27       

Days with Greatest Percentage Loss

RankDateCloseNet Change% Change
110/19/19871738.74       -508.00       -22.61       
210/28/1929260.64       -38.33       -12.82       
310/29/1929230.07       -30.57       -11.73       
411/06/1929232.13       -25.55       -9.92       
512/18/189958.27       -5.57       -8.72       
608/12/193263.11       -5.79       -8.40       
703/14/190776.23       -6.89       -8.29       
810/26/19871793.93       -156.83       -8.04       
910/15/20088577.91       -733.08       -7.87       
1007/21/193388.71       -7.55       -7.84       
1110/18/1937125.73       -10.57       -7.75       
1210/09/20088579.19       -678.91       -7.33       
1302/01/191788.52       -6.91       -7.24       
1410/27/19977161.15       -554.26       -7.18       
1510/05/193266.07       -5.09       -7.15       
1609/17/20018920.70       -684.81       -7.13       
1709/24/1931107.79       -8.20       -7.07       
1807/20/193396.26       -7.32       -7.07       
1909/29/200810365.45       -777.68       -6.98       
2007/30/191471.42       -5.30       -6.91       

 

 

In percentage terms, here are the DJIA's 10 biggest annual gains:
The Dow's Best Years
RankYearClose% Change
1
1915
99.15             
81.66             
2
1933
99.90             
66.69             
3
1928
300.00             
48.22             
4
1908
86.15             
46.64             
5
1954
404.39             
43.96             
6
1904
69.61             
41.74             
7
1935
144.13             
38.53             
8
1975
852.41             
38.32             
9
1905
96.20             
38.20             
10
1958
583.65             
33.96             

 

 

In percentage terms, here are the DJIA's 10 largest one-year declines:

The Dow's Worst Years

RankYearClose% Change
1
1931
77.90             
-52.67             
2
1907
58.75             
-37.73             
3
1930
164.58             
-33.77             
4
1920
71.95             
-32.90             
5
1937
120.85             
-32.82             
6
1914
54.58             
-30.72             
7
1974
616.24             
-27.57             
8
1903
49.11             
-23.61             
9
1932
59.93             
-23.07             
10
1917
74.38             
-21.71             

 

 

Dow Jones Industrial Average Milestones
First Close AboveCloseDateFirst Close AboveCloseDate
10001003.16     11/14/197211001121.81     02/24/1983
12001209.46     04/26/198313001304.88     05/20/1985
14001403.44     11/16/198515001511.70     12/11/1985
16001600.69     02/06/198617001713.99     02/27/1986
18001804.24     03/20/198619001903.54     07/01/1986
 
20002002.25     01/08/198721002102.50     01/19/1987
22002201.49     02/05/198723002333.52     03/20/1987
24002405.54     04/06/198725002510.04     07/17/1987
26002635.84     08/10/198727002700.57     08/17/1987
28002810.15     01/02/199029002900.97     06/01/1990
 
30003004.46     04/17/199131003101.52     12/27/1991
32003201.48     01/03/199233003306.13     04/14/1992
34003413.21     06/01/199235003500.03     05/19/1993
36003604.86     08/18/199337003710.77     11/16/1993
38003803.88     01/06/199439003914.48     01/21/1994
 
40004003.33     02/23/199541004138.67     03/24/1995
42004201.61     04/04/199543004303.98     04/24/1995
44004404.62     05/10/199545004510.79     06/16/1995
46004615.23     07/05/199547004702.73     07/07/1995
48004801.80     09/14/199549004922.75     11/15/1995
 
50005023.55     11/21/199551005105.56     11/29/1995
52005216.47     12/13/199553005304.98     01/29/1996
54005405.06     02/01/199655005539.45     02/08/1996
56005600.15     02/12/199657005748.82     05/20/1996
58005838.52     09/13/199659005904.90     10/01/1996
 
60006010.00     10/14/199661006177.71     11/06/1996
62006206.04     11/07/199663006313.00     11/14/1996
64006430.02     11/20/199665006547.79     11/25/1996
66006600.66     01/07/199767006703.79     01/10/1997
68006833.10     01/17/199769006961.63     02/12/1997
 
70007022.44     02/13/199771007214.49     05/05/1997
72007214.49     05/05/199773007333.55     05/15/1997
74007435.78     06/06/199775007539.27     06/10/1997
76007711.47     06/12/199777007711.47     06/12/1997
78007895.81     07/03/199779007962.31     07/08/1997
 
80008038.88     07/16/199781008116.93     07/24/1997
82008254.89     07/30/199783008314.55     02/11/1998
84008451.06     02/18/199885008545.72     02/27/1998
86008643.12     03/10/199887008718.85     03/16/1998
88008803.05     03/19/199889008906.43     03/20/1998
 
90009033.23     04/06/199891009110.02     04/14/1998
92009211.84     05/13/199893009328.19     07/16/1998
94009544.97     01/06/199995009544.97     01/06/1999
96009643.32     01/08/199997009736.08     03/08/1999
98009897.44     03/11/199999009958.77     03/15/1999
 
1000010006.78     03/29/19991010010197.70     04/08/1999
1020010339.51     04/12/1999 1030010339.51     04/12/1999
1040010411.66     04/14/1999 1050010581.42     04/21/1999
1060010727.18     04/22/1999 1070010727.18     04/22/1999
1080010831.71     04/27/1999 1090011014.69     05/03/1999
 
1100011014.69     05/03/1999 1110011107.19     05/13/1999
1120011200.98     07/12/1999 1130011326.04     08/25/1999
1140011405.76     12/23/1999 1150011522.56     01/07/2000
1160011722.98     01/14/2000 1170011722.98     01/14/2000
1180011850.61     10/04/20061190011947.70     10/12/2006
 
1200012011.73     10/19/20061210012116.91     10/23/2006
1220012218.01     11/14/20061230012305.82     11/16/2006
1240012416.76     12/14/20061250012510.57     12/27/2006
1260012621.77     01/24/20071270012741.86     02/14/2007
1280012803.84     04/18/20071290012961.98     04/20/2007
 
1300013089.89     04/25/20071310013105.50     04/26/2007
1320013211.88     05/02/20071330013312.97     05/07/2007
1340013487.53     05/16/20071350013556.53     05/18/2007
1360013633.08     05/30/20071370013851.73     07/12/2007
1380013851.73     07/12/20071390013907.25     07/13/2007
 
1400014000.41     07/19/20071410014164.53     10/09/2007

 

The Dow Performance at the Onset of Major National Security Events 

 Dow Jones Industrial Average
EVENT DATE DAY % CHANGE FOR DAY** 6-MONTHS
LATER		 1-YEAR LATER
 Operation Iraqi Freedom 03/19/03 Wednesday 0.26% 14.59% 23.24%
 America Strikes Back 10/07/01 Sunday -0.57% 12.63 -18.61
 Terrorist Attack 09/11/01 Tuesday -7.12% 10.47 -10.66
 Oklahoma Bombing 04/19/95 Wednesday 0.68% 14.92% 32.46%
 WTC Bombing 02/26/93 Friday 0.17% 8.41% 14.07%
 Somali Crisis 12/04/92 Friday 0.57% 7.80% 12.63%
 Operation Desert Storm 01/16/91 Wednesday 4.57% 18.73 30.14
 Kuwait Invasion* 08/02/90 Thursday -6.31% -5.81% 3.69%
 Panama & Noriega 12/15/89 Friday -1.53% 7.17% -5.32%
 Hostage in Grenada 10/25/83 Tuesday -0.69% -7.10% -3.31%
 Reagan Shot 03/30/81 Monday -0.26% -14.56% -17.12%
 Iran Crisis 11/04/79 Sunday -0.77% -0.32% 14.44%
 Watergate
   First Story Published 08/01/72 Tuesday 0.62% 6.60% -1.36%
   Congressional Investigation 02/07/73 Wednesday -1.15% -6.91% -15.43%
   Senior WH Aides Indicted 03/01/74 Friday -1.00% -21.14% -14.12%
   Articles of Impeachment
   Passed		 07/27/74 Saturday -1.74% -10.02% 5.14%
   Nixon Resigns 08/08/74 Thursday -1.59% -10.74% 2.53%
 Vietnam Conflict 02/26/65 Friday -0.41% -0.81% 5.48%
 Tonkin Gulf Attack 08/04/64 Tuesday -0.90% 7.58% 5.18%
 Kennedy Assassination 11/22/63 Friday -2.89% 12.04% 21.58%
 Cuban Missile Crisis 10/22/62 Monday -1.85% 25.05% 31.41%
 Sputnik Launched 10/04/57 Friday -2.01% -4.59% 15.60%
 Korean War 06/25/50 Sunday -4.65% 2.36% 9.34%
 Pearl Harbor 12/07/41 Sunday -3.50% -9.48% -1.37%
 Lusitania Sinks 05/07/15 Friday -4.54% 36.01% 32.75%
 USS Maine Explodes 02/15/1898 Tuesday -2.14% 14.91% 24.90%
 *The 6.31% drop is over 3 trading days: 1.2% on the day of the invasion, and followed by a decline of 1.92% on Friday and 3.32% on Monday.
 **If the event occurred after the U.S. market closed or on a non-trading day, the % change for day reflects the next trading day's activity.

 

sources and other references

http://www.mercurynews.com/nationworld/ci_10713766
http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average

 

 

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Comments

4 Responses to “The importance of Dow Jones Industrial (DJIA) and statistics of best and worst years”

  1. Stocks and Bonds » Blog Archive » The Importance of Dow Jones Industrial (Djia) and Statistics of … on October 18th, 2008 3:41 am

    [...] Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest US market index, after the Dow Jones Transportation Average , which Dow also created. COMPUTATION …[Continue Reading] [...]

  2. Bailout » Blog Archive » The Importance of Dow Jones Industrial (Djia) and Statistics of … on October 18th, 2008 7:36 am

    [...] The Dow , the oldest continuing US market index, is a way of measuring the combined stock values of 30 big US companies. It’s one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones …[Continue Reading] [...]

  3. djia on October 20th, 2008 7:52 am

    [...] The importance of Dow Jones Industrial (DJIA) and statistics of …What were removed and replaced: On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Sears Roebuck, and Union Carbide were removed from the DJIA and replaced by Intel, Microsoft, Home Depot, and SBC Communications. … – [...]

  4. dow jones industrial average on October 20th, 2008 8:24 am

    [...] The importance of Dow Jones Industrial (DJIA) and statistics of …Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest US market index, after the Dow Jones Transportation Average, which Dow also created. COMPUTATION … – [...]

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