Dow Divisor

The Dow Divisor is used to calculate the Dow Jones Industrial Average (DJIA) that you hear about on the news every night. A simple numerical value, the DJIA is obtained by adding up the prices of the Dow 30 stocks and dividing this figure by the Dow Divisor.

But what genius comes up with this Divisor? In an equation too complicated to be done by any entity except a computer, the divisor evolves over time and is based on stock splits, spinoffs, and other changes in the Dow 30. This helps to ensure that such changes do not skew the numerical value of the all-important DJIA.