American financial newspaper Barron’s has suggested that Apple and Google could join the elite 30 companies of The Dow Jones Industrial Average stock index within the next year.
The report suggested that Apple and Google could replace Bank of America, HP and aluminium producer Alcoa.
Barron’s suggested that the changes should be made to because the Dow is “due a makeover” as it hasn’t been adjusted since 2009. However, admitting Apple and Google to the Dow could be difficult because of the way the index is calculated, claimed the report.
Unlike the Standard & Poor's 500 and other major indexes, the Dow weighs its 30 components based on the absolute price of their shares, reports Reuters.
Barron's Andrew Bary and Rich Rescigno discuss the changes the Dow Jones Industrial Average would have to undergo to be able to include high-priced stocks such as Apple and Google, in this video.
Apple would overwhelm the index with a 26 percent weighting, double the influence of current Dow component IBM, whose $207 stock price gives it a 12 percent weighting in the index, Barron's said. To guarantee a Dow spot, Barron's said, Apple would have to split its shares by five-for-one or 10-to-one
The Dow Jones Industrial Average is a stock market index founded on 26 May 1896. It is a closely watched benchmark for tracking stock market activity. Averages are scaled to compensate for the effects of stock splits and other adjustments.