Currently, the dow jones industrial average is computed by adding the prices of 30 large "blue-chip" stocks and dividing by 30 calculating the total market value of the 30 firms in the index and dividing by 30 measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted for stock splits and large stock dividends

Price-weighted Average

Explanation:

Currently, the dow jones industrial average is computed by price-weighted average as it considers stocks of very  high quality and thus is used to measure the value of blue chip stocks. Though Dow Jones Industrial average (DJIA) is one of the most popular indexes, but it represents only 30 blue chip companies which is the major disadvantage. It is found by adding the price of 30 "blue chip" stocks by dividing with a divisor called as Dow Divisor.

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