No. of Recommendations: 8
The price-weighted nature of the DJIA is asinine. They really should put the index out to pasture.
The argument for keeping it that way has always been the consistency: they've always done it that way, so there is no discontinuity in that sense.
But it would be very easy to have all new entrants be given a weighting equal to (say) $100 per share the day they enter, leaving all existing picks unchanged. Or new entrants could even have an initial weighting of 1/30th of the total.
But it isn't really worth the bother fixing the weighting, since it has so many other flaws. It's not really an index in the modern sense, it's just a hand picked set of "industry leaders" that changes from time to time. The Ark Innovation of the gilded age.
Jim
