Dow Jones Equity Indices Key Terms

These Dow Jones key terms will be a helpful addition to your knowledge base

By M. Krasniak, Freelance Writer/Editor

The Dow Jones company offers a broad array of equity indices. An index allows you to quickly check the relative performance of a group of stocks in a sector of the economy or part of the world. Many people use a country's largest index as a measure of the performance of the country as a whole. Each index measures something different, so it is very important to be aware of the components of each index. To measure the performance of the biggest companies in the U.S., one could use the Dow Jones Industrial Average; for a specific group of companies, you might use the Dow Jones Transportation Average. To drill down by style of investing, you could use style indices.

Dow Jones Industrial Average

The Dow Jones Industrial Average is the most commonly quoted index in the U.S. It is a measure of the stock price performance of the largest 30 companies in the U.S. Many people use the Dow Jones Industrial Average as an indicator of the performance of the whole economy, but this might be an exaggeration of the importance of this index.
Try: InvestorWords.com has a good discussion of the Dow Jones Industrial Average.

Dow Jones Transportation Average

The Dow Jones Transportation Average is the oldest average still calculated by the Dow Jones company. It is a measure of the performance of transportation stocks. Transportation stocks include shipping companies, airlines, and railroads. Like some other Dow Jones averages, the Dow Jones Transportation Average is a price-weighted average.
Try: StreetAuthority has a comprehensive explanation of the Dow Jones Transportation Average, including its components.

Dow Jones Utility Average

The Dow Jones Utility Average is the third of the main indices produced by the Dow Jones company, along with the industrial and transportation averages. The Dow Jones Utility Average includes 15 utility companies, and is a price-weighted index like its counterparts. People closely follow the Dow Jones Utility Average because of its relationship with interest rates.
Try: Money-zine.com has a good discussion of the Dow Jones Utility Average, including a list of relative weighting of its components.

Dow Jones Global Titans 50 Index

Dow Jones produces more than just U.S. equity indexes. To get an idea of how the most important 50 companies in the world are doing, you can simply use the Dow Jones Global Titans 50 Index. As the name suggests, this index tracks the performance of the biggest 50 multinational firms in the world that have a stock listing somewhere in the world.
Try: The information on Dow Jones Global Titans 50 Index on the Investopedia website is worth looking into.

Sector index

A sector index tracks the performance of the companies in a particular sector of the economy. A sector is the broadest sub-group of the businesses in an economy. For example, Consumer Durables is a sector of the U.S. economy. Within each sector are many industries. Since some sectors perform better than others do at certain times, it can be helpful to see the economy separated into such broad categories.
Try: Nasdaq has a helpful article discussing sector indexes.

Style index

There are several portfolio management styles out there and it can be difficult to measure the performance of a particular portfolio. A style index is a benchmark measure of the returns from a particular investing style using available stocks. The Dow Jones company produces several style indices, so whatever your style of investing, they have a benchmark for you.
Try: The Dow Jones Indexes website has a very helpful discussion of style indices.