Ftse Dow Jones and other Major Markets Are Correlated
Dow Jones Stock Index
Now, a little understanding the concept of equity indices, we come to explain to us on this occasion.
Among these indexes, are the oldest and certainly most popular series of indicators bag, I mean the prominent industrial average Dow-Jones. This index, which in abbreviated form is called DJIA is a price-weighted average of 30 industrials “Favorite” listed on the New York Stock Exchange (ie, those with the greatest impact at the time).
The value of this index is obtained by adding the current prices of the 30 current or actions that amount and dividing by a divisor that is adjusted to take into account shares broadcasts free
In other words, since in this series has become a balancing of prices, one share of high price has more weight than another in the series with the lowest price, for example, a 10% in an action 100 $ (Ie $ 10) a change in the upper range that a 10% on a $ 30 (ie $ 3).
In addition to the range of prices for industrial action, the Dow-Jones also has an indicator means of actions aimed at reducing the price of these and changes in the average of the sample over time. Ie, it prevents the results are changing too. This is a forecast against abrupt changes.
A major purpose of this index is a theory analysis, call: Theory of market analysis based on the performance of Dow Jones. The analyst identifies three trends in the evolution of the securities (securities or shares): primary, secondary and tertiary levels. The most important is the primary trend, which defines the behavior of the market in the long term. The trends can be both upside and downs, which is defined by the analysis of the graphics formed by the evolution of the indexes.
However, it is so important and significant to analysts a stock index such as Dow Jones, because to some extent this index is feasible to do a lot of deductions and analysis, most analysts, the focus of the Dow Jones utility as follows:
1. Trademark use it as fixed. The Dow Jones is very useful for examining the total returns of the bag along a certain period of time and use the returns derived from the same parameter (measured or base) to judge the outcome of the shares in portfolio individual alternatives. This means, which enables comparisons, which will enable a more relational.
2. Use as relations. Securities analysts and portfolio managers on actions, in particular, examines the factors that influence the movements in share prices in order to determine the relationship between economic variables and alternative movements of the overall stock market. That is, that the Dow Jones can be used as an indicator to see how variables affect economic (inflation, price, exchange rate, etc.). In the actions involved in the stock market.
3. Use as forecast. The specialists are studying the price changes that occurred in the past to predict future price movements. That is, a current index in the Dow Jones, will serve as a basis for predicting behavior in actions, both globally and individually.
In fact, the Dow Jones is one of the Stock Indices largest worldwide, While began with the name of “Industrial” because when he saw the light were enterprises of heavy industry which had the boom; today companies include in their analysis of the financial sector and information technology, though the name has not changed, the companies it covers.