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Lesson 15. The Ticker Tape, Stock Indice... > The Dow Jones Average - Pg. 96

The Ticker Tape, Stock Indices, and Other Media 96 · The Industrial Average lists blue chip stocks of 30 companies in industries ranging from com- puter technology such as IBM, to raw steel manufacturers such as Bethlehem Steel. · The Utility Average lists the stocks of 15 power-producing companies, such as Consolidated Edison (Con-Ed) for electricity, and Consolidated Natural Gas for gas. · The Transportation Average lists stocks in 15 transportation-based companies ranging from airlines, such as TWA, to move-it-yourself truck rental companies, such as Ryder. · The Composite Average lists the average of the combined 65 stocks listed by the other three averages. The most commonly used of these averages is the Dow Jones Industrial Average. Remember, however, that this is but one portion of the whole Dow Jones average. These 30 stocks, all traded on the floor of the New York Stock Exchange, have been chosen by the editors of The Wall Street Journal because they are thought to accurately reflect the state of the American markets. Because of the sheer number of types of industries represented on the stock exchange, however, many critics believe that an index of 30 stocks cannot possibly depict the state of the American markets accu- rately. In addition to industry representation issues, the stocks on the Industrial Average receive criticism for being exclusively blue chip stocks. Critics of the index believe this exclusivity also limits its ability to effectively represent the different responses of various types of stock to the same stimuli. One of the methods employed by the Dow to nullify some of the extenuating market circumstances in its averages is the use of a divisor. In a proper average, the number of entrant figures is the same number as the one used to divide the total sum. In the case of the Dow and many other indices, however, this number has been adjusted to (hopefully) provide a more accurate average. The divisors used to calculate the Dow Jones Average appear daily as a footnote to the Dow Jones