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 »