2007-07-06 22:05:05 · 6 answers · asked by ben_ev0lent 1 in Business & Finance ➔ Investing
I also answered this in the other place where you asked. It looks like lots of people answer questions that they don't understand. Perhaps they are confusing the DJIA with the S&P 500. That index does not include dividends.
Dividends are included in the DJIA. Whenever a dividend is paid, the divisor is adjusted. This is equivalent to reinvesting this in the index.
2007-07-07 09:04:20 · answer #1 · answered by Ranto 7 · 2⤊ 1⤋
No it doesn't. That's one of the numerous weaknesses in the DJIA. Other problems are that it tracks too few stocks and uses a bizarre share-weighted pricing scheme. Still, it has proven to be a useful barometer of the market's overall direction, which is probably why it's still widely used today.
Amendment: With all due respect, taranto should double check his sources. He posted a link which has nothing to do with how the DJIA is calculated. It's easy enough to verify that dividends are NOT included in this average. For example, quoting from the following link,
"The Dow Jones Industrial Average is a flawed index. The index uses price weights instead of conceptually superior market valuation weights, the companies included in the index are not chosen systematically and are not very representative of the U.S. market, and the index ignores returns from dividends. This paper shows that alternative stock price indices which use superior weighting methods and a more systematic inclusion criterion perform very similarly to the Dow Jones Industrial Average. However, ignoring dividends underestimates the long-run returns earned by stock market investors dramatically. If Dow Jones & Co. had included dividend returns in the DJIA when it was reformed in 1928, the index would be over 250,000 today."
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2016-02-15 19:35:21 · answer #3 · answered by ? 3 · 0⤊ 0⤋
2
2017-03-06 07:57:39 · answer #4 · answered by Jones 3 · 0⤊ 0⤋
1
2017-02-15 08:45:04 · answer #5 · answered by ? 4 · 0⤊ 0⤋
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2007-07-07 08:38:43 · answer #6 · answered by Anonymous · 0⤊ 2⤋