DJIA Changes

[Kraven]

Goldman, Nike, Visa to join Dow; Alcoa, HP, BofA out

 

http://finance.yahoo.com/news/goldman-nike-visa-join-dow-124902191.html

[rpadebet]

Huh, BAC is up! Was hoping the indexers would hand me their BAC >:(

[gurpaul88]

+1

 

Was hoping for the same thing  :-\

[fareastwarriors]

DJIA is no S&P 500 and besides the market is up overall. Not enough downward pressure.

[fareastwarriors]

DJIA is no S&P 500 and besides the market is up overall. Not enough downward pressure.

 

But few mutual and exchange-traded funds actually follow the Dow industrials when compared to the S&P 500. Some $1.6 trillion in mutual and exchange-traded funds directly track the S&P 500, according to S&P Dow Jones Indices. That compares with just $30 billion that follows the Dow.

 

 

http://blogs.wsj.com/moneybeat/2013/09/10/dow-shakeup-wont-leave-big-trading-footprint/

[Philip Morris IV]

This oughta throw off all those forecasters.  ;D  Except now we can expect a new batch of forecasts from the pundits.

 

Interesting change for the nature of the Dow.  Seeing as Goldman and Visa are both over $150/sh, they're just behind IBM as the highest-weighted components.

[rpadebet]

DJIA is no S&P 500 and besides the market is up overall. Not enough downward pressure.

 

But few mutual and exchange-traded funds actually follow the Dow industrials when compared to the S&P 500. Some $1.6 trillion in mutual and exchange-traded funds directly track the S&P 500, according to S&P Dow Jones Indices. That compares with just $30 billion that follows the Dow.

 

 

http://blogs.wsj.com/moneybeat/2013/09/10/dow-shakeup-wont-leave-big-trading-footprint/

 

How about pseudo indexers and index front runners? Wont they amount to something?

[blainehodder]

Not sure if anyone has access to this article, but the abstract is interesting:

 

http://journals.cambridge.org/action/displayAbstract;jsessionid=4D05E6D707AF949FADDA67B8C2C0B4E1.journals?fromPage=online&aid=4106568

 

We examine the stock market effect of changes in the composition of the Dow Jones Industrial Average (DJIA). Unlike S&P 500 listing studies, we find that the price and the trading volume of newly listed DJIA firms are unaffected. We attribute this result to a lack of index fund rebalancing, since index trading is limited for most of our sample period and index funds mimic the S&P 500, not the DJIA. Firms removed from the index, however, experience significant price declines. We consider information signaling, price pressure, imperfect substitutes, and information cost/liquidity explanations for these asymmetric findings. The evidence is consistent with the information cost/liquidity explanation, which holds that investors demand a premium for higher trading costs and for holding securities that have relatively less available information.

 

Buying all deleted DJIA stocks is obviously a poor strategy as is buying all 52 week low stocks.  This has to do with the fact that many deletions like 52 week lows have an obvious declining trajectory and some are on the way to bankruptcy...

 

This is hardly the case for BAC, therefore it wll not likely be effected in any way. Corellation doesn't equal causation.