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One other consideration is that, at its current price, Apple is not able to be considered for inclusion in the DJIA since that index is price-weighted and Apple
by yeldarb 13y ago
One other consideration is that, at its current price, Apple is not able to be considered for inclusion in the DJIA since that index is price-weighted and Apple would account for a huge portion of the index.
After the 7-1 split, Apple will be a likely candidate.
http://www.fool.com/investing/general/2014/04/23/apple-just-made-its-case-to-join-the-dow-will-inte.aspx http://www.fool.com/investing/general/2014/04/23/apple-just-...
- Eliezer 13y agoPrice-weighted? Price-weighted? (Market Economics Fairy bangs head against wall.)
- ghshephard 13y agoYes -how insane is that. When I first heard of it, I was almost certain that the person was wrong - but 5 minutes on wikipedia proved they were correct. But, once again - if the automated purchasing for the stock drives the value up too high, then people will make money selling it - I don't buy into the "inclusion in the indexes drives up long term valuation of a company" - would be interested if anybody has a study that shows otherwise.
- jmalicki 13y agoThe most interesting example is Royal Dutch vs. Shell Transport. Both companies had equal shares in Shell Oil - Shell Transport was in the S&P 500, Royal Dutch was not, and sold for much less, despite having identical economic interests - until they finally merged in 2005. When Yahoo was added to the S&P 500, its price jumped 24%. The name for this anomaly is usually called the "index effect", and whether it affects valuation is controversial.