Charles Dow and his Stock Index

On July 3 1884 Charles Henry Dow together with his colleague Edward Jones composed and published an stock average - called the Dow Jones Railroad Average -, which contained nine railroads and two industrial companies. He developed the stock index as part of his market research and it was meant to serve as a reference value to determine fluctuations of the stock market. It first appeared in the Customer's Afternoon Letter, a daily two-page financial news bulletin, which was the precursor to The Wall Street Journal later on also founded by Dow, which should become one of the most respected financial publications in the world. 


Besides the railroad companies, which were the largest companies in the USA by that time, the two industrial companies (Pacific Mail Steamship Company and Western Union) were taken as highly volatile and speculative. Later on the composition of the Index changed, but remained with 12 companies in the first place. These original group of 12 stocks ultimately chosen to form the Dow Jones Industrial Average in 1896 did not contain any railroad stocks anymore, but purely industrial stocks. Of these, only General Electric currently remains part of that index. The other 11 were:

• American Cotton Oil Company, a predecessor company to Bestfoods, now part of Unilever.
• American Sugar Company, became Domino Sugar in 1900, now Domino Foods, Inc. 
• American Tobacco Company, broken up in a 1911 antitrust action.
• Chicago Gas Company, bought by Peoples Gas Light in 1897, now an operating subsidiary of Integrys Energy Group. 
• Distilling & Cattle Feeding Company, now Millennium Chemicals 
• Laclede Gas Company, still in operation as the Laclede Group, Inc., removed from the Dow Jones Industrial Average in 1899. 
• National Lead Company, now NL Industries, removed from the Dow Jones Industrial Average in 1916. 
• North American Company, an electric utility holding company, broken up by the U.S. Securities and Exchange Commission (SEC) in 1946. 
• Tennessee Coal, Iron and Railroad Company in Birmingham, Alabama, bought by U.S. Steel in 1907; U.S. Steel was removed from the Dow Jones Industrial Average in 1991. 
• U.S. Leather Company, dissolved in 1952. 
• United States Rubber Company, changed its name to Uniroyal in 1961, merged with private B.F. Goodrich in 1986, bought by Michelin in 1990.

Today, the Dow Jones Industrial Average Index includes 30 large, publicly owned companies based in the United States that have traded during a standard trading session in the stock market. Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow is among the most closely watched U.S. benchmark indices tracking targeted stock market activity.

At yovisto you might learn more about the stock market and the worldwide importance of corporate stocks with the lecture given by Prof. Shiller from Yale University.