Dow Jones Index (Dji) Not A Good Measure Of The Us Economy

758 words, 4 pages

Intro Sample...


UGBA10

The Dow Jones Index (DJI) is a powerful tool that serves as an indicator of the state of the US Economy. This correlation can be made if the performance of the DJI is compared to that of the US GDP. This is supported by the fact that the growth rates between 2010 and 2011 for both measures were very similar. The growth of the US GDP was 3.3% while the growth of the Dow Jones was 5.5% (1,2). Although the Dow Jones serves as an effective measure of the US Economy with its direct correlation to GDP fluctuation, it does not incorporate a good selection of representative companies.
For example, Bank of America, the lowest performing stock in the Dow Jones, should be dropped from the DJI because it does... View More »

Body Sample...


The committee should, however, continue to choose companies that they think would be able to sustain economic stability over a long period of time. This encompasses the very essence of what a blue chip company is, which is a significant criteria for companies to be in the DJI. Lastly, companies that are chosen should be companies that have an impact globally, not just in the US. The DJI is a financial indicator used by investors around the world, as companies on the list effect countries globally, so more attention should be paid to picking companies that effect the world as a whole.
Overall, the Dow Jones Index is an effective measure of the state of the US Economy. However, there is still a need for reform with regard to the different companies representing the economy in the index. With Google added, the index would better measure the emerging technology industry, and its importance in the future of the US economy. In addition, more immediate measures should be taken and more concrete evaluation procedures should be instilled, to account for these emerging companies.
Works Consulted
1. “2010 World GDPs” http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf
2. “Historical and Future GDPs” http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/weorept.aspx
3. “Definition of Blue Chip companies” http://www.investopedia.com/terms/b/bluechip.asp#axzz1p3NX2M7t
“What is the DJI?” http://www.investopedia.com/terms/d/djia.asp#axzz1p3NX2M7t
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