It’s a useless metric for the state of the stock market. It’s used because it has been around forever and people hate change.

Why is it useless? It is calculated by tracking 30 companies on the stock market and pretty much adding up their current stock price. This is a meaningless metric because you could have one company that is worth $100 that offers two shares of stock, each worth $50. Another company worth $100 chooses to have 50 shares of stock each worth $2.

The companies are the same value, but their stock price is vastly different. Let’s say they’re both on the DOW list of 30 companies. When the first company doubles in value, so does it’s stock price. Now the company is with $200 and the stock is worth $100. That means the dow increased by 50.

When the second company doubles in value, it’s stock also doubles to $4. Now the DOW increases by a value of 2…

This is why the DOW is useless. It’s intent is to measure the general trend of the stock market, but with the two examples above it clearly fails at doing that. There are many better stock market indexes that provide a more reliable insight intoarket trends, the S&P 500 for example. The DOW is meaningless and anyone who is using it as a reference for the health of the stock market is an idiot.

Anyone using it to talk about the health of the economy overall is out of their gord and should be in the loony bin.