http://www.bizjournals.com/sacramento/stories/2009/03/09/daily19.html How could Google be added to the Dow given that it trades ~$300 per share? Wouldn’t Google assume an enormous weighting (around 25%) if C and GM were booted?
Maybe that’s the point. I’m not really sure, I thought all the stocks were value weighted against a numerator that evens this out. I’m most likely incorrect here. Now you’ve got me curious.
The divisor accounts for stock splits and a few other things. It’s currently around .125 or something. If you divide the current level of the DJIA by the sum of the 30 component prices you’ll get the point movement per dollar gained or lost. That equals about 8 at the current market levels. So if JP moves up $2 one day the DJIA will move 16 points in the green. Now if you add Google to the mix, which easily can swing $15 in a day, it alone could swing the DJIA 120 points. The Dow is so lopsided. I don’t think the author of that article really understands the characteristics to a price weighted index.
Ah, that makes more sense. Assuming there isn’t some sort of additional fundamental in play that we are unaware of.
We’ve discussed this before…but I am sort of skeptical, I mean the company isn’t exactly an “industrial”…could be interesting. Doubt DJ board would ever do it though…