Tuesday, February 12, 2008
Google 26.3% of the DJIA? Not yet
This week Altria and Honeywell were removed from the index and were replaced by Bank of America and Chevron. I found it interesting that Google wasn't added since it's one of the biggest companies in the world by market cap. Ends up being that the DJIA is a price weighted index (the higher the stock price, the higher the weight in the index). If the makers of the index would have added GOOG to their index it would have been the largest part of the index.. by far..at 26.3%!!!! One of two things needs to happen, split google or change the way they calculate the return on the Dow. Take a look at the chart by B.I.G.
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3 comments:
And that is why price weighted indicies are stupid.
Couldn't agree more. I don't understand why they don't switch to a value weighted index just like the S&P 500. With that said the DJIA has reflected the economy pretty well in its 100+ year history sooo why change it now.
What a nightmare that could be.
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