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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: John F. Dowd who wrote (31165)	10/26/1999 8:53:00 PM
From: Jim Lamb	Respond to of 74651

Dow Not Really an `Average' NEW YORK (AP) -- The Dow Jones industrial average actually isn't an ``average' of the 30 stocks it represents -- although it started out that way. When it was first devised in 1896, the Dow's value was calculated by adding up the stock prices of 12 major companies and then simply dividing by 12. The resulting average was expressed in terms of points, rather than dollars. The formula remained the same in 1916 when the editors of The Wall Street Journal -- which created and still controls the Dow -- expanded it to 20 companies. But when the Dow was expanded to 30 companies in 1928, the editors began using a new ``divisor' rather than the number of stocks, to keep the average stable even if one stock was substituted for another, or if a stock was split. Stock splits occur when a company cancels its shares and issues a larger amount of new shares, but at a lower price. For instance, in a 2-for-1 split, the price would be cut in half, but the number of shares would double. The new divisor will be calculated to make sure the Dow starts Monday with the same value as it had the preceding Friday. Only after trading begins Monday will the new stocks have an impact. High-tech stocks like Intel (NasdaqNM:INTC - news) and Microsoft (NasdaqNM:MSFT - news) could cause the average to rise faster than the old stocks being deleted, but they will also likely mean bigger swings in the average since tech stocks are more volatile than those being removed.