Performance of Dow Jones Industrial Average: micro and ...
Performance of Dow Jones Industrial
Average: micro and macro-level analysis
Luis Palacios
Rabih Moussawi
Denys Glushkov
Bob Zarazowski
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Motivation
Dow tends to hover around 1,000 and 10,000 thresholds for some
time. Is it psychological anchoring of investors or there are
fundamental explanations behind it?
DJIA
10,000
1,000
100
Overlaying 1966-1982 DJIA performance
with 1997-2010
16,000
1,200
14,000
1,000
12,000
800
10,000
8,000
600
6,000
400
4,000
200
2,000
0
0
1997_2010
1962-1982
Micro approach: DJ constituents
Pretty impressive coverage in terms of fraction of the entire market cap, ~20%
Dow Jones Coverage as % of Total Equity Market Capitalization
35%
30%
25%
20%
15%
10%
5%
0%
1960
1961
1962
1963
1964
1965
1967
1968
1969
1970
1971
1972
1974
1975
1976
1977
1978
1979
1981
1982
1983
1984
1985
1986
1988
1989
1990
1991
1992
1993
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2009
?
DJ Coverage % of Market Cap
Performance of DOW vs total stock market
How good was DJ composition reflective of the overall US economy over time?
DJIA returned less than the overall market, especially during 1977-1982
period.
$100 Buy and Hold DJIA vs Total Equity Market
based on real returns incl. dividends (adjusted for inflation)
140
120
100
80
60
40
20
0
196601
196606
196611
196704
196709
196802
196807
196812
196905
196910
197003
197008
197101
197106
197111
197204
197209
197302
197307
197312
197405
197410
197503
197508
197601
197606
197611
197704
197709
197802
197807
197812
197905
197910
198003
198008
198101
198106
198111
198204
198209
?
DJIA with Dividends
Total Market Returns incl Dividends
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