does anyone know the formula used to calculate the S&P 500, Dow etc..?

Question

These bench marks are used daily, but what do they really measure & represent?

Don-
the Dow Jones Industrial Average onsists of the 30 largest US industrial companies. I dont think the average price for each of them is over $13,000 considering the highest priced one is IBM @ $113.

Answer 1

First order explanation:

DJIA weighs against the stock price for the 30 companies it tracks. For example Stock A is $40/share while Stock B is 20$/share Stock A's movements will affect ~ 67% of the two stock "DJIA" index.

S&P 500 weighs against the market cap of companies. Therefore one ultra-cap company will have a dominate affect on the index movement verses many less large cap companies.

Check out some books on stocks and indexes or visit websites like investopedia.com, fool.com, etc. Also the indexes and stock exchanges have their own websites.

Answer 2

The Dow Jones Industrial Average has about 20 leading companies that they track. Their figures are the average stock prices etc on these few companies. The S&P 500 is 500 of the leading companies in America. This is a much broader selection and probably a more acurate measurement of how the economy is going.

Answer 3

Dow J I per wiki says there is calculation in section 3.1

http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average

And NASDAQ >
This does not include the formula but maybe you can contact them

Nasdaq
See: National Association of Securities Dealers Automatic Quotation System

Nasdaq stock market
The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies.

National Association of Securities Dealers (NASD)
Nonprofit organization formed under the joint sponsorship of the investment bankers' conference and the SEC to comply with the Maloney Act, which provides for the regulation of the OTC market.

National Association of Securities Dealers Automatic Quotation System (Nasdaq)
An electronic quotation system that provides price quotations to market participants about the more actively traded common stock issues in the OTC market. About 4000 common stock issues are included in the Nasdaq system.

Answer 4

The formula is very complex, since it was originally based upon the share prices when those indexes were first established. Stocks have split many times since then, therefore the current numbers are far larger than current prices.
However, they are representative of the average movement of the stocks they contain. That was and is their purpose.