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Dow faces an important change to how it’s calculated

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The owner of the 121-year-old Dow Jones Industrial Average is set to tweak an important component of the blue-chip gauge on Friday: its divisor.

The so-called divisor, or in this case multiplier, is the figure used to determine the influence of any of the 30 components that make up the price-weighted Dow industrials












DJIA, +0.14%










The Dow isn’t exactly an average of its components, as its name might imply; instead, the value of the Dow is determined by calculating the sum of the prices of its components using a divisor that factors when a company splits its shares. Stock splits can swing the balance of influence for any one blue-chip component.

At present, the divisor is 0.146021281 and because that figure is below 1 it is a multiplier. In other words, $1 price move in any Dow component translates to a price swing of 6.8483 points.

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On Friday, that divisor is likely to change for the first time in about two years because of the consummation of a “merger of equals” between Dow Chemical Co.












DOW, +1.60%










 and DuPont & Co.












DD, +1.57%










which is a Dow component. That combination wraps up Thursday, with shares of the new entity, DowDuPont , trading on the New York Stock Exchange Friday under the ticker symbol “DWDP.”

S&P Dow Jones Indices said the change “won’t cause any disruption in the level of the index.” But said “the divisor used to calculate the index from the component’s prices on their respective home exchanges will be changed prior to the opening” on Friday. S&P DJ Indices is a unit of McGraw Hill Financial, which owns the Dow indexes.

Officials at S&P DJ Indices declined to tell MarketWatch what the precise divisor will be until Friday.

The last time the divisor was changed was in December 2015, when Dow component Nike Inc












NKE, +0.76%










 completed a 2-for-1 stock split.

On Thursday, the Dow was trading modestly higher, up 0.2% at 21,939, while the S&P 500












SPX, +0.47%










 and the Nasdaq Composite Index












COMP, +0.80%










 were seeing firmer gains after upbeat economic data.

Here’s when some past divisor changes have occurred:

· Jan 1, 2002: 0.144521

· June 3, 2002: 0.14445222

· Aug. 21, 2002: 0.14418073

· Nov. 19, 2002: 0.14585278

· Feb. 18, 2003: 0.14279922

· Aug. 20, 2003: 0.14249417

· Sept. 30, 2003: 0.13500289

· April 8, 2004: 0.14090166

· June 6, 2004: 0.13561241

· Nov. 15, 2004: 0.13532775

· June 13, 2005: 0.13033708

· July 14, 2005: 0.12560864

· Oct. 3, 2005: 0.12493117

· Nov. 20, 2006: 0.12482483

· April 2, 2007: 0.123051408

· June 13, 2007: 0.123017848

· Feb. 19, 2008: 0.122834016

· April 1, 2008: 0.122820114

· Sept. 22, 2008: 0.125552709

· June 8, 2009: 0.132319125

· July 2, 2010: 0.132129493

· Aug. 13, 2012: 0.12914682

· Sept. 24, 2012: 0.130216081

· Sept. 23, 2013: 0.155715905

· March 19, 2015: 0.14985889

· July 1, 2015: 0.149677273

· Dec. 24, 2015: 0.146021281

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