Ever wonder how the Dow Jones Industrial Average is calculated? It's essentially the average price of its 30 component stocks. This may seem strange, though, with the Dow recently around 10,000 and none of the 30 stocks trading anywhere near $10,000 per share.
On average, though, the shares really would trade in the neighborhood of $10,000 -- if they had never been split, issued dividends, or undergone major changes such as spin-offs or mergers during the time they were listed in the index.
For example, consider a share of Microsoft
Today, though, most stocks don't trade at such lofty levels -- thanks to events such as stock splits. To get from current stock price levels to the larger index number, a number called the "divisor" is used. Here's how it works.
If General Electric
Besides GE and Microsoft, the Dow includes such blue chips as Intel