If the market prices of the 30 stocks in the Dow Jones Industrial Average all change...
If the market prices of the 30 stocks in the Dow Jones Industrial Average all change by the same dollar amount on a given day (ignoring the stock splits), which stock will have the greatest impact on the average? Explain why?
Homework Answers
The stock trading at the highest dollar price per share will have the greatest impact on the Dow Jones Industrial average.
This is because stocks with higher share prices are given greater weight in the index. Consequently, a higher percentage change in a higher-priced component (share price value in this case) will have a greater impact on the final calculated value of the index.
DJIA = SUM (Component stock prices) / Dow Divisor
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