Google Fails To Make The Dow

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Google Fails To Make The Dow

By: Nathan Weinberg
2008-02-18

The Dow Jones Industrial Average, considered by many to be the primary benchmark of the stock markets performance, added two companies...

...this week. The Dow holds 30 stocks at a time, trying to hold a balanced portfolio of stable, large, important companies in different industries, and this time it dropped the Altria Group and Honeywell, and added Bank of America and Chevron.

One company it didnt add, one which has been rumored for addition to the Dow since it went public almost four years ago: Google, Inc. Google was snubbed, but for a perfectly reasonable reason. The Dow does not even out the stock price of companies in it, so a company like Google, with a $500-plus share price, would take up over eighteen times the space in the Dow than a company like Microsoft, even though Microsoft is worth $100 billion more.

If Google were in the Dow, its wild fluctuations in share price would send the market shooting up and down every day. The Dow is supposed to reflect the entire economy, and go up or down smoothly based on the health of the economy, not shoot up or down every time Google releases a new feature. Google would overwhelm the index and render it useless as a barometer, and as long as the stock stays so expensive, it will probably never make the Dow.
(via Search Engine Land)

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About the Author:
Nathan Weinberg writes the popular InsideGoogle blog, offering the latest news and insights about Google and search engines.

Visit the InsideGoogle blog.


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