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Today, this index has been replaced by a high-tech rolling index that updates every ten seconds.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.
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Finance: What is the Dow Theory?10 Views
Finance allah shmoop what is dow theory Well it's a
push me pull you index Yeah like you know the
doctor do little lama thing with the overall average of
the dow thirty stocks here and the dow jones transport
index here where one goes well generally the other follows
that is they are highly correlated in price and one
is basically an indicator of where the other is heading
Why Well originally the dow transports were railroads which appalled
all the crap that the dow industrials made so you'd
think that one would follow the other And if the
push me pull you thing didn't work for you well
take a short look at this caterpillar crawling you know
like that one part goes forward and then the other
follows Well dow theory is one of a good gillian
black box crystal ball theories that charters tried to use
to predict how the stock market would run in the
future so that they could profit from those predictions And
like all other black box theories they work sometimes even
very nicely for a while with high prediction levels That 00:01:08.293 --> [endTime] is well until they don't No
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