The monthly closing values of the Dow Jones Industrial Average (DJIA) for the period beginning in January 1950 are given in the file C02_02.xlsx. According to Wikipedia, the Dow Jones Industrial Average, also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is one of several stock market indices created by Charles Dow. The average is named after Dow and one of his business associates, statistician Edward Jones. It is an index that shows how 30 large, publicly owned companies based in the U.S. have traded during a standard trading session in the stock market. It is the second oldest U.S. market index after the Dow Jones Transportation Average, which Dow also created. The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index.

Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow is among the most closely watched benchmark indices for tracking stock market activity. Although Dow compiled the index to gauge the performance of the industrial sector within the U.S. economy, the index’s performance continues to be influenced not only by corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm.

Using the summary measures and graphical tools from this chapter, analyze this important time series over the given period. Summarize in detail the behavior of the monthly closing values of the Dow and the associated monthly percentage changes in the closing values of the Dow.

Answer rating: 100% (QA)

The table representing DJIA for the period beginning in January 1950 is shown below To obtain the su... View the full answer