Which of the following best describes the information provided to investors by the Dow Jones Industrial Average (DJIA)?

• A. It measures the total value of all stocks traded on the New York Stock Exchange.
• B. It tracks the performance of all technology companies in the United States.
• C. It provides the average dividend yield of all U.S. stocks.
• D. It indicates the overall performance of 30 large, publicly traded U.S. companies.

Answer: (D)

Verified step by step guidance

1. Understand the concept of the Dow Jones Industrial Average (DJIA): The DJIA is a stock market index that tracks the performance of 30 large, publicly traded companies in the United States. It is used as a benchmark to gauge the overall health and trends of the U.S. stock market.
2. Clarify what the DJIA does not represent: It does not measure the total value of all stocks traded on the New York Stock Exchange, nor does it exclusively track technology companies or provide the average dividend yield of all U.S. stocks.
3. Identify the correct description: The DJIA provides an indication of the overall performance of 30 major U.S. companies, which are selected to represent a broad spectrum of industries.
4. Relate the DJIA to investor decision-making: Investors use the DJIA as a tool to assess market trends and economic conditions, helping them make informed decisions about their investments.
5. Summarize the importance of understanding stock indices: Knowing what the DJIA represents helps investors differentiate between various indices and their purposes, ensuring accurate interpretation of market data.