Average(redirected from Calculation of a average)
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Average (across-day) measures
A stock market average is a mathematical way of reporting the composite change in prices of the stocks that the average includes.
Each average is designed to reflect the general movement of the broad market or a certain segment of the market and often serves as a benchmark for the performance of individual stocks in its sphere.
A true average adds the prices of the stocks it covers and divides that amount by the number of stocks.
However, many averages are weighted, which usually means they count stocks with the largest market capitalizations more heavily than they do others. Weighting reflects the impact that the stocks of the biggest companies have on the markets and on the economy in general.
The Dow Jones Industrial Average (DJIA), which tracks the performance of 30 large-company stocks, is the most widely followed market average in the United States.