Why a Cheaper Stock Moves the Dow More Shorts [tfEnriuF7nq]
The Dow Jones Industrial Average is a price-weighted average: add up the share prices of the thirty members, then divide. That sounds neutral. It is not. It means a company influence over the number depends on its share price and not on how big the company actually is. A giant whose shares trade at fifty dollars moves the index one tenth as hard as a smaller firm whose shares trade at five hundred, purely because of a past decision about how many slices the ownership was cut into. A board can double the number of slices on a Tuesday afternoon; nothing about the business changes, but its power over the Dow is halved. This is why almost every index built since weights by the total market value of the company instead. Full episode - What Is the Dow Jones, Actually: Everything in one place: #dowjones #stockmarket #investing #finance #Shorts