Charles Dow and Edward Jones created the Dow Jones Industrial Average (DJIA) on May 26, 1896. The index initially included 12 of the most prominent industrial companies in the United States, such as General Electric and American Cotton Oil. Dow was a financial journalist who wanted to make market performance easily understandable for the average person. He devised the DJIA to provide investors with a simple, representative snapshot of market performance. The DJIA has since evolved to include 30 large, publicly traded companies from various industries.
Charles Dow’s other major contribution to financial analysis is “Dow Theory,” a pioneering framework for understanding market trends and price movements. Dow Theory, derived from Dow’s editorials in The Wall Street Journal, remains relevant today and forms the basis for modern technical analysis.
Despite its limitations, the Dow remains one of the most widely recognized and cited stock market indices in the world.