Dow Jones Equity Market Index

The Dow Jones Equity Market is an index which, making use of a market capitalization system, shows the price changes of shares. This involves more than a hundred different groups of industries in the United States that, when taken together, make up more than three-fourths of the market capitalization in the United States. Trading as reflected in the Dow Jones Equity Market Index takes place in the New York Stock Exchange, the American Stock Exchange, and that NASDAQ Stock Market.

Stock market indices generally function to provide information on specific areas of the stock market. By providing such measurements, they are able to supply investors with information on how well certain portfolios or funds are performing. Therefore, this information is used by investors and brokers for decision-making on both the purchase and sale of assets.

There are many types of stock market indices. Global stock market indices include large corporations all over the world, whereas national indices are comprised only of the specific country’s largest corporations.

Although the Dow Jones Equity Market Index is one of the most widely-recognized in the world, the system which it employs, namely capitalization-weighting, is not without its share of criticism. Advocates would make use of the modern portfolio theory, asserting that an investor’s best move is to place favor on the market portfolio, which is weighted based on capitalization. However, critics point out other methods for weighting, which also consider the figures for the corporation’s revenue and net profit. Alternative weighting schemes, such as equal-weighting or diversity-weighting schemes have therefore been suggested and employed for other indices.

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