Tip 1: What is the Dow Jones index

Finance

Tip 1: What is the Dow Jones index

The Dow Jones index is one of the key indicators,used to assess the state of the US economy. It is the oldest American stock index, which was created at the end of the XIX century.

Index calculation

In 1884, an American financial analystCharles Dow, along with his partner, Edward Johnson, developed a composite measure based on the price of shares of the 11 largest American companies, of which two were industrial and nine were railroad. Soon, having finalized his concept, he began to publish his calculations in a small, two-page business newspaper, which quickly gained popularity among New York financiers. Later, on its basis, the existing newspaper "Wall Street Journal" began to appear. Thus, the first Dow Jones index was released in 1886: it was then based on quotations of shares of 12 major industrial companies in the US and was calculated as the arithmetic mean of these indicators. As a result, the starting point for the Dow Jones index was a value of 40.94 points. Gradually, the number of components of the index increased: in 1916 it reached 20, and in 1928 - 30. This number of companies is used to calculate the Dow Jones index today. However, only one company, General Electric, remained among the first participants of the indicator among them. Its modern name is the Dow Jones industrial index, which is denoted on the international stock market by the abbreviation DJIA, which is the abbreviation of the English-language name of the index - "Dow Jones Industrial Average". Nevertheless, some of the companies whose stock quotes are used today to calculate the index, in fact no longer refer to the industrial sector.

Dynamics of the index

Its first value, slightly exceeding 40points, the Dow Jones index has long ago left behind. This was due to a significant increase in the value of shares of companies included in the calculation, as well as a revision of the original composition of the index. In 1966, for the first time the figure reached a value in excess of 1000 points, in 1995 it exceeded 5000 points for the first time, and in 1999 - 10,000 points. The maximum value of the index - 11728.98 points - was recorded in 2000, which became one of the the most successful for the American economy. The most significant falls in the history of the indicator were recorded in 1987, when the shares of most US companies collapsed on October 19 for no apparent reason, and in 2001, when the US stock market collapsed under the influence of news of the September 11 terrorist act. Then for one day the value of the index fell by 22.6% and 7.1%, respectively.

Tip 2: When the New York Stock Exchange collapsed

The collapse of the New York Stock Exchange occurred more than once. Each collapse left its imprint on the financial system. In total, there are five stock market falls that occurred in 1873, 1907, 1929, 1987 and 1994.

When the collapse of the New York Stock Exchange happened

1873 year

A person who understands the financial system,understands how unstable it is. This is clearly seen in the example of the New York Stock Exchange, which has repeatedly suffered a serious collapse. The first of them occurred in 1873. The reason for this financial collapse is the panic of traders. This collapse was called "Black Friday" and was the beginning of the "Long Depression", which occurred between 1873 and 1896.

1907 year

In 1907 the index of the stock exchange of New Yorkcollapsed by almost 50%. This happened against the backdrop of the poor economic condition of the country in recession. Bankers deposited funds in bulk. In the end, many banks and businesses became bankrupt. A significant role in this belongs to the authoritative financier John Morgan. But it is worth noting that not all traders have become bankrupt. Jesse Livermore, a well-known speculator, then made a legendary deal, earning $ 3 million. By the way, this year's events served as the basis for the later creation of the Federal Reserve System.

1929

In 1929 there was a very strong collapse, soas the market in just a week became cheaper in value by $ 30 billion. This is a huge sum! Investors tried to get rid of shares before they depreciate. As a result, 12.9% of all securities traded on the market were sold per day. This have not happened before. The Dow Jones index was lower by 11%. This situation occurred on Thursday, October 24, so it was called "Black Thursday". But that was only the beginning. A few days later, on October 28 and 29, the stock market was shocked again. Over the week, the market fell by 40%. The US government spent less money during the First World War. Thus, the world economic crisis of 1929-1939 entered the history.

1987

In 1987, the Dow Jonesfall, because over a day, more than 20% of the industrial index was lost. The markets of many countries suffered huge losses. There were no clear reasons for the events that occurred. There were a lot of orders, so computers could not cope with them. Authorities have solved this problem with limited access to trading.

1994

For one day, on October 11, on the ruble exchangecollapsed by 845 points against the dollar. Although it is worth noting that the situation has stabilized in a few days and the rate has become almost the same. Despite this, the collapse of the exchange, although very short-lived, left its mark and entered the financial history.