Theoretical Dow Jones Index

1992 was the end of an era for the Dow Jones. That was the year it stopped using the “theoretical Dow Jones Index.” And investors everywhere wept. Actually...no one wept, because the system that replaced it was much better and faster.

The theoretical Dow Jones index provided a rough, kind of blurry snapshot of a trading day. It was based on calculations that assumed all stocks on the index hit their high and low prices at the same time. Which (let’s be real) doesn’t happen. So while the index could give us a ballpark idea of trade activity on a given day, the highs on the index looked higher and the lows looked lower than they were in real life.

Today, this index has been replaced by a high-tech rolling index that updates every ten seconds. It’s much more accurate than its predecessor, which helps investors be more accurate as well.