Suppose the stock of Microsoft increases in value by $5 per share. If all other Dow stock prices remain unchanged, how does this affect the DJIA?

Question

Quizplus · Accepted Answer

The Dow Jones Industrial Average (DJIA) is price-weighted, meaning each company's stock price affects the index in proportion to its price per share. A $5 increase in the price of a single Dow component stock would result in a change in the DJIA, and the exact impact is determined by the Dow Divisor, which is adjusted for stock splits, dividends, and structural changes. As of the knowledge cutoff in 2023, the Dow Divisor is around 0.155715905 (though it changes over time), making a $5 increase in a stock price result in a 32.10 point increase in the DJIA (5 divided by the Dow Divisor).

Suppose the Stock of Microsoft Increases in Value by $5