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DJIA Divisor
Here is how it gets adjusted: "To understand how the formula works, consider a stock split. Say three stocks are trading at $15, $20 and $25; the average of the three is $20. But if the company with the $20 stock has a 2-for-1 split, its shares suddenly are priced at half of their previous level. That's not to say the value of the investment has changed; rather, the $20 stock simply sells for $10, with twice as many shares available. The average of the three stocks, meanwhile, falls to $16.66. So, the Dow divisor is adjusted to keep the average at $20 and reflect the continuing value of the investment represented by the gauge." (WSJ, May 28, 1996)
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