The Historical Dow
by Carl Sundquist
Recently, The Wall Street Journal completed 94 years of continuous publication of the Dow Jones
Industrial and Railroad (now Transportation) averages. Quite a record. Charles Dow, the first editor and
founder of The Wall Street Journal, is credited with the compilation of the original averages. He did not
use a weighted mean or make adjustments of any nature but simply added the closing price of the stocks
in his averages and divided the total by the number of companies in his list.
The Dow Jones Industrial Average (DJIA) as we know it dates back to October 1928. The list was then
expanded from 20 stocks with several substitutions to compile the original average of 30 stocks (Figure
1). The average at that time was made up of some issues that are vaguely familiar today or strikes a
memory somehow, while others on the list have been completely forgotten, absorbed into other
companies, changed their own names or gone out of business entirely. Keeping with the original system
of compilation, the current price of the listed stocks in 1928 was added together and divided by 16.67.
Subsequent changes were made in the average through the years. Various stocks were taken off the list,
while others were added, with adjustments made for stock splits. The current DJIA's list has stocks in
common with the original, but differs quite a bit otherwise (Figure 2). Curiously, International Business
Machines Co. (IBM) has been the prodigal son of the Dow Jones Industrial Average, at times banished
from the list yet allowed to return later. IBM was first placed on the list on May 26, 1932, replacing
National Cash Register, only to be replaced a few years later on March 14, 1939, by American Telephone
& Telegraph (AT&T). Only after an absence of 40 years was IBM brought back into the fold on June 29,
1979, replacing Chrysler Motors; it has remained on the list ever since. We are never told by whose
mysterious hand at Dow Jones & Co., the keeper of the average, these changes are made. In fact, we are
seldom told why the substitutions are made; we can only guess, watching the changes and using them as
reflections of the era.