Composition Changes Prompt Another Look at the DJ Utilities Average
Effective May 12, 1997, The Wall Street Journal made several changes in the Dow Jones 15 utilities average, with six utility issues dropped and six replacements:
The purpose of the changes was to revitalize the Dow Jones utilities average by adding some of the more actively traded issues. One result was that the “more desirable” stocks added were higher-priced, $42.33, on average, while the “less desirable” stocks dropped were lower-priced, $24.92, on average (based on May 9 closing prices).
The role of the utilities average was also discussed. The Wall Street Journal article noted that because utilities are big borrowers, they are interest-rate sensitive and therefore a leading indicator of interest rates, and, to some extent, a leading indicator to the overall market as well.
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