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Goldman Sachs, Visa and Nike are to join the Dow Jones Industrial Average (DJIA), arguably the world’s most famous stock market gauge.
They will replace Bank of America, Hewlett-Packard and Alcoa, which are to be booted out after the close of trading on Friday, 20th September.
The changes will be effective with the opening of trading on Monday, 23rd September.
The DJIA is a price-weighted measure of 30 US blue-chip companies. The index covers all industries with the exception of transportation and utilities, which are covered by the Dow Jones Transportation Average and the Dow Jones Utility Average.
While stock selection is not governed by quantitative rules, a stock typically is added to the index only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. Maintaining adequate sector representation within the index is also a consideration in the selection process.
The index changes were prompted by the low stock price of the three companies slated for removal and the index committee’s desire to diversify the sector and industry group representation of the index.
Goldman Sachs, headquartered in New York, provides investment banking, securities, and investment management services, as well as financial services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.
Visa, headquartered in San Francisco, is a payments technology company that engages in the operation of retail electronic payments network worldwide.
Nike, headquartered in Beaverton, engages in the design, development, marketing, and sale of athletic footwear, apparel, equipment, and accessories.
The changes won’t cause any disruption in the level of the index. The divisor used to calculate the DJIA from its components’ prices on their respective home exchanges will be changed prior to the opening on 23rd September. This procedure prevents any distortion in the DJIA’s reflection of the US stock market.
A number of exchange-traded funds listed around the world will be affected by the change, including funds from SPDR, Lyxor, BMO, iShares, ComStage, ProShares, NEXT Funds, Simplex and ProFund Advisors.
The largest of these funds is the NYSE Arca-listed SPDR Dow Jones Industrial Average ETF (DIA), which has more than $11 billion in assets under management.