DOW JONES INDUSTRIAL AVERAGE (DJIA)

A measure of stock prices of important industrial companies, the Dow Jones Industrial Average (DJIA) was first printed in the Wall Street Journal in 1897. The average is an indicator of the overall stock market and is used, along with other indexes, by investors, stockbrokers, and analysts to make investment forecasts and decisions.

In 1882 Dow, Jones and Company (the comma between the two names was later dropped) was founded by financial reporters Charles Henry Dow (1851–1902) and Edward Davis Jones (1856–1920). Since the founding of the New York Stock Exchange (NYSE) in 1792, business reporting had been largely based on rumor or speculation. Dow and Jones were determined to provide U.S. businesspeople and investors with upto-date and accurate reporting on the stock market.

Dow, Jones and Company began publishing composite lists of major stocks in 1884. In 1897 the Dow Jones Industrial Average made its first appearance in the Wall Street Journal. Dow and Jones had conceived of the index as a summary measure of the market, which could be used to analyze past trends, indicate current trends, and even predict future ones. The first DJIA averaged the prices of 12 major companies. The list had been expanded since—in 1916, it averaged the stock prices of 20 companies, in 1928, 30 companies were averaged. Adjustments were made as the result of company mergers and dissolution. Though it was a measure only of the New York Stock Exchange, the Dow Jones Industrial Average has been called a barometer of the stock market. News of fluctuations in the DJIA can affect market prices around the world.

See also: Charles Dow, New York Stock Exchange (NYSE), Wall Street Journal

NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS (SYSTEM) (NASDAQ)

The National Association of Securities Dealers Automated Quotations system (NASDAQ) is a computerized communication system that provides the bid and asked prices of more than 5,000 over-the-counter (OTC) stocks that have met NASDAQ's registration requirements. Introduced in 1971 by the National Association of Securities Dealers (NASD), NASDAQ achieved a listing of more than 4,000 companies and an annual trading volume of over $1 billion by the early 1990s. It is the second largest securities market in the United States in terms of share and dollar volume, but it is the largest in terms of the number of companies listed.

By late 1997, NASDAQ listed approximately 5,500 companies, compared to some 3,000 listed on the New York Stock Exchange. Even though NASDAQ has many more listed firms than the NYSE, market capitalization of NYSE-listed firms was greater, around $8.7 trillion compared to $1.95 trillion for NASDAQ-listed firms. NASDAQ is known as the market for smaller companies, and especially for technology firms. A large percentage of NASDAQ's market capitalization comes from technology companies.

See also: New York Stock Exchange, Over the Counter Market, Stock, Stock Market