It took just two months of Standard & Poor’s control of Dow Jones Indexes (CME sold it in return for a stake in the new and larger S&P DJ Indices group) for S&P to start thinking about how to reform the venerable Dow Jones Industrial Average, the second-oldest index still going.
It desperately needs reform: three of the US’s 10 largest companies are excluded, and it is calculated by averaging share prices, a daft approach better suited to the days of slide rules. This video explains – charts after the break show how the Dow has performed, and discuss how investors should respond:
James Mackintosh is the Financial Times' Investment Editor, writing and presenting the daily Short View column and video. In 16 years at the FT his posts have included comment editor, motor industry editor and hedge funds correspondent, as well as spells in the Parliamentary lobby and Paris. He was the first reporter hired for FT.com, joining two weeks before it launched.
John Authers is the Financial Times' Senior Investment Columnist, writing the Saturday Long View and a regular Monday column. In a 22-year career at the FT, his previous posts have included global head of the Lex column, investment editor, US markets editor, Mexico City bureau chief and US banking correspondent. His latest book is The Fearful Rise of Markets. 