you also need to consider dividends paid out. This is cash...

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ljcamp

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13/12/23

06:19

Post #: 71415819
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Originally posted by schmunzel75: ↑

As an educational note, why it is flawed to directly compare the performance of the DJIA and ASX indices.

The Dow Jones Industrial Average (DJIA) and the ASX (Australian Securities Exchange) use different methodologies for calculating their indices, including their approaches to price-weighting.

DJIA (Dow Jones Industrial Average):
Methodology: The DJIA is a price-weighted index, meaning the components are weighted based on their individual stock prices.
Calculation: The index is calculated by summing the prices of its 30 component stocks and dividing by a divisor. Changes in the stock prices directly impact the index value.
ASX (Australian Securities Exchange) Methodology: The ASX uses a market capitalization-weighted methodology for many of its indices, including the ASX 200, which is a common benchmark for the Australian stock market.
Calculation: In a market capitalization-weighted index, the weight of each stock is based on its total market value (market capitalization), calculated as the stock price multiplied by the number of outstanding shares.In summary, the key difference lies in how the indices assign weights to their component stocks. The DJIA uses a price-weighted approach, while the ASX typically uses a market capitalization-weighted approach for its major indices.

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you also need to consider dividends paid out. This is cash leaving the balance sheet and all things being equal reducing market cap by the corresponding amount.

DJIA does not typically pay dividends and if constituents do the payout ratio compared to ASX200 listed companies is very small.

essentially he the two indexes compared are only allowing for the growth component of the index and not total return. Need to add back divies particularly on the ASX200, I believe an accumulation index is a much better representation. Then you have currency lol…

sips tea, carry on, I’m enjoying the intellectual brawl unfolding.

not advice

AKE Price at posting: $9.13 Sentiment: Buy Disclosure: Held
6 Upvote

1 Great analysis

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