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Replicating the Dow Jones Industrial Average

Author

Listed:
  • Jacky Lin
  • Genevieve C. Selden
  • John B. Shoven
  • Clemens Sialm

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.

Suggested Citation

  • Jacky Lin & Genevieve C. Selden & John B. Shoven & Clemens Sialm, 2021. "Replicating the Dow Jones Industrial Average," NBER Working Papers 28528, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28528
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    Cited by:

    1. Victoria Stack & Lana L. Narine, 2022. "Sustainability at Auburn University: Assessing Rooftop Solar Energy Potential for Electricity Generation with Remote Sensing and GIS in a Southern US Campus," Sustainability, MDPI, vol. 14(2), pages 1-14, January.

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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