It’s been a wild decade for the Dow Jones Industrial Average, the benchmark index of 30 stocks that serves as a proxy for the American stock market.
Although the Dow has changed substantially in the decades since it was founded in 1896, the last 10 years have been a fickle period for the index. Only two thirds of its current components were on the list in some form when it was updated on Nov. 1, 1999. The changes came about for several reasons. Corporate name changes and mergers were a big factor. The more recent adjustments came about through fundamental shifts in the direction of the U.S. economy.
John Prestbo, editor and executive director of Dow Jones Indexes and chairman of the Dow Jones Index Oversight Committee, says those shifts came from both growth and catastrophe. Over the last five years, growth put American International Group (AIG), Pfizer (PFE), Verizon Communications (VZ), Bank of America (BAC), Cisco Systems (CSCO), Coca-Cola (KO) and Kraft Foods (KFT) on – or back on – the Dow.
More recently, catastrophe pushed off AIG, Citigroup (C) and General Motors (GM). They were victims of the financial crisis and crippling recession.
"I think it's been average to slightly above average in the number of changes this decade," says Prestbo who, along with Wall Street Journal editor Robert Thompson and two other senior members of the newspaper's editorial staff, is responsible for maintaining and updating the index. "For example, in the 1950s, we didn't change any stocks. This past decade has seen a lot of changes that were forced by external events, but we also did make adjustments along the way to reflect changes in the composition of the market."
Not that it was a smooth ride. During the first eight years of the decade, the index was on a tear jumping 26% from Dec. 17, 1999 to Oct. 9, 2007 when the Dow closed at a record high 14,165. Since then, the Dow has fallen dramatically. On Friday, the index finished the day at 10308, down about 8.4% for the last 10 years.
SmartMoney took a closer look at the changes to the index’s components during that rocky period.
Trackback URL for this story: http://www.smartmoney.com/tb/Jdmq.2B98.3D
What is a Trackback?It is a way to tell us that you have published something that references this story.
How do I send a Trackback? If you blog or mention this story on your website, you can use this Trackback URL to notify us about it. Some blogging software programs can help in sending a Trackback to us.
Click here to read more about Trackbacks.
Decade in Review: The Changing Dow (On the Street) http://www.smartmoney.com/investing/stocks/decade-in-review-the-changing-dow/?cid=1122
Decade in Review: The Changing Dow: Decade in Review: The Changing Dow Smartmoney.com - 14 minutes ago It's been ... http://bit.ly/4w1KKf
Decade in Review: The Changing Dow: Decade in Review: The Changing Dow Smartmoney.com - 14 minutes ago It's been ... http://bit.ly/4w1KKf
Read Full Article »