Why Do We Still Care About the Dow?

Sharp piece by Adam Davidson for the NYT Magazine:

And those are the least of the Dow’s problems. More troubling is that it ignores the overall size of companies and pays attention to only their share prices. This causes all sorts of oddities. ExxonMobil, for example, divides its value into nearly five billion lower-cost shares, while Caterpillar has around 650 million more expensive ones. Therefore ExxonMobil, one of the largest companies in history, pulls less weight on the Dow than a company less than a fifth its size.

I knew the Dow was imprecise and rather arbitrary compared to something like the S&P 500, but the more I learn about the Dow the more nonsensical I realize it is.

Monday, 20 February 2012