Dow Jones Industrial Average

Learning Goal: I’m working on a business question and need an explanation and answer to help me learn.

BACKGROUND

The book explains that the DOW is a stock index comprised of 30 industrial stocks within the United States economy. You can think of the DOW as a proxy of the economic power, wealth and strength of the nation. Originally all of these firms were domestically oriented. Today these firms are among the biggest multinational firms in the world. The file DJIA Monthly Close  Download DJIA Monthly Close contains monthly values of the Dow from 1950 through mid-2015.

The monthly closing values of the Dow Jones Industrial Average (DJIA) for the period beginning in January 1950 are given in the fileC02_02.xlsx  Download C02_02.xlsx. According to Wikipedia, the Dow Jones Industrial Average, also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is one of several stock market indices created by Charles Dow. The average is named after Dow and one of his business associates, statistician Edward Jones. It is an index that shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market. It is the second oldest U.S. market index after the Dow Jones Transportation Average, which Dow also created.

The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index.

Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow is among the most closely watched benchmark indices for tracking stock market activity. Although Dow compiled the index to gauge the performance of the industrial sector within the U.S. economy, the index’s performance continues to be influenced not only by corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm.

DIRECTION (ANSWER THE FOLLOWING QUESTIONS I.E. QUESTION NUMBERS 1, AND 2)

  1. Construct a time series plot of the closing values. Then write a line or two to interpret it i.e. whether the values are increasing or decreasing over time.
  2. Calculate summary measures (average, median, st. dev., min, max, 25th percentile, 75th percentile, and count) of the variable Percentage Change using Excel. For percentile, use an inclusive function. Comment on your findings.

SUBMISSION

1. Download the Excel file Data file: C02_02.xlsx  Download C02_02.xlsxand answer the above questions in the Excel file.

2. Save the file as “DJ Industrial average_your last name.xlsx”. For example: “DJ Industrial Average_Jonassen.xlsx”

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