A Dow Jones news release said the 112-year-old stock index was previously changed on February 19, when two stocks out of the 30 in the index were replaced ( Bank of America Corp. and Chevron Corp. replaced Altria Group, Inc., and Honeywell International, Inc. ). AIG has been in the Industrial Average since April 1, 2004.
“We are refraining at this point from adding another stock in the financial industry because of the extremely unsettled conditions. We realize this decision leaves the Dow Jones Industrial Average underweighted in financials, and we will address this situation in due course,” said Robert Thomson, managing editor of The Wall Street Journal. “We are adding Kraft because the Dow Jones Industrial Average had no representation in food products. Kraft is one of the world’s leading food companies.”
The Journal’s top news editor oversees the makeup of “The Dow,” which Charles H. Dow created as a 12-stock index in May 1896.
John A. Prestbo, editor of Dow Jones Indexes, said, “There are no pre-determined criteria for a stock to be added or deleted, though we intend that all components be established U.S. companies that are leaders in their industries.” For the sake of continuity, composition changes are intentionally rare, Mr. Prestbo said, “although this time change was forced by the effective nationalization of AIG and its very low stock price.” AIG has been in the Industrial Average since April 1, 2004.
The changes won’t cause any disruption in the level of the index. The divisor used to calculate The Dow from its components’ prices on their respective home exchanges will be changed prior to the opening on September 22. This procedure prevents any distortion in The Dow’s reflection of the U.S. stock market, according to a press release.
More information on the history of stocks in the DJIA is at http://www.djindexes.com/mdsidx/downloads/DJIA_Hist_Comp.pdf