Home
Index Yourself on the Dow PDF Print E-mail
Written by Ralph Huey, CCPS   

When the Dow Jones Industrial Average broke through the 13,000 barrier in April, it was headline news. If you thought to yourself, “13,000 what?” you were probably not alone. greenpimp.1.inline.jpgMany people may not be able to explain how stock market indexes like the Dow work or what they measure. This quiz may enhance your understanding of the Dow.

  1. The Dow Jones Industrial Average is calculated based on the stock prices of:

    1. 30 actively traded companies

    2. 11 actively traded companies

    3. The S&P 500

    4. The Nasdaq

  2. The Dow is expressed in points, which represent:

    1. Dollars

    2. Degrees of value

    3. Dividends

    4. Debt ratios

  3. The Dow is calculated and published by:

    1. Investor’s Business Daily

    2. The U.S. Treasury

    3. The Commerce Department

    4. The Wall Street Journal

  4. What nickname is applied to the stocks measured by the Dow?

    1. The Big Board

    2. Blue chips

    3. Bulls and bears

    4. Bellwethers

Answers:

  1. a. The Dow measures movements in the value of 30 actively traded stocks that are often referred to collectively as “the market.”

  2. b. In much the same way as the degrees on a thermometer have no purpose other than to record changes in temperature, the points in an index are meant only to show changes in stock values. The more points, the greater the cumulative value of the stocks being measured.

  3. d. The Dow was created in 1896 by Charles Dow, whose efforts led to the creation of Dow Jones & Company, which publishes The Wall Street Journal.

  4. b. The name “blue chips” is borrowed from poker, in which the blue chips are the most valuable. Blue-chip stocks are issued by well-established companies that are thought to be less vulnerable to economic adversity. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in an index. The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

Ω


 
< Prev   Next >
[ Back ]