Reading: Dow Jones

Improve your reading skills

Read about the 'Dow Jones Industrial Average' and the man who created it. Study the vocabulary words first, then do the exercise. Here are some questions to think about as you read:

                                      Who was Charles Dow?
                                    What was the first Dow Jones Industrial Average?
                                      How did it get its name?
                                      How many stocks were there in the first DJIA?
                                      What kind of stocks were they?
                                        What is the DJIA like today?
                                        Why do we use the DJIA?

Below is a list of words that you will come across in the reading. Read the explanation to help you understand the article better.

stock market - the buying and selling of units of ownership in a company.

indicator - something that shows a measurement

New York Stock Exchange - the largest and oldest place where buying and selling of stocks occurs

publish - to print and give out written work

an index - a measurement that explains the value of something

economy - the overall idea of the making and using of products and services within a home, country or in the
world.

blue chip - a stable and profitable well known company

derived from - taken from

method - way to do something

average - when you add separate values together and divide the sum by the number of values-for example the average of 15, 10, and 20 is 15, or 45 divided by 3.

to hold a seat -in the early years, the New York Stock Exchange required the people who bought and sold
stocks to sit in assigned seats, now those companies or individuals who "own seats" are
called members.

to account for - to take into consideration

stock split - when the value of a stock is divided in half and the number of stocks is multiplied by two.

dividend- the money from the profits of a company that is paid to owners of stock in that company.

Enjoy your reading!

The Dow Jones Industrial Average is a U.S stock market indicator that was first developed by Charles Dow in 1896. Charles Dow, who was from New England, began his career as a newspaper writer in Massachusetts. He later went to New York City and held a seat on the New York Stock Exchange. In 1882, Dow and a man named Edward Jones started a financial services company which today publishes The Wall Street Journal. Charles Dow wrote articles for The Wall Street Journal newspaper that developed the use of an index that was the average price of twelve railroad stocks whose daily prices where added together and divided by twelve. This average served as an indicator of the national economy.

Today, the Dow Jones Industrial Average (DJIA), which originally contained only twelve stocks, uses an index derived from thirty stocks. The selected stocks represent companies that are blue chip companies from a variety of business areas such as financial services, technology, pharmaceutical and energy. Companies include well known worldwide companies such as IBM, Citigroup Inc, and Merck & Co. The stock prices of the thirty companies are divided by a number that accounts for stock splits and dividends. The Dow Jones Industrial Average, or DJIA, is the most widely used index to measure stock activity.