What will happen to the Dow once Cisco and Travelers are officially added? Will the price just be recalculated and we will see a big jump? If so is it possible to know what the recalculated price will be? OR will it be a graduall move over the next few days? Or has it already been priced in? Sorry if this is a really obvious question, but we all have to start somewhere.....
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Dow Recalculation
- Thread starter maninjapan
- Start date
There will be no jump. The coefficient the dow index is multiplied by gets adjusted.
Thanks Frost, nice and simple
In case you care about specifics its actually called the Dow divisor. Not the coefficient as I said in the previous post. However the concept is still the same.. in case you want to know more indepth how the process works check out this link:
http://www.investopedia.com/articles/02/082702.asp
http://www.investopedia.com/articles/02/082702.asp
Quote from maninjapan:
What will happen to the Dow once Cisco and Travelers are officially added? Will the price just be recalculated and we will see a big jump? If so is it possible to know what the recalculated price will be? OR will it be a graduall move over the next few days? Or has it already been priced in? Sorry if this is a really obvious question, but we all have to start somewhere.....
The change will take place on June 8. A new Dow Divisor
will be used to calculate the index at the open that day.
The current divisor = 0.125552709.
Thanks for the link. All clear now. So its pretty much a seamless transistion, but is it common to see a run up after a recalculation led by the new stocks? or is it just not a big deal?