I was scandalized by what I saw on NHK BS 7 (satellite station #7 for Japan’s public TV). The story was about the “NY Stock Market going below $10,000.” I kid you not. Here’s what was wrong (the numbers are approximate):
The DJIA was denominated in dollars: once as 9500 doru, then again as $9500 (I even think that in both cases the figure was shown to two decimal places. Don’t these people know that the DJIA is an arbitrary index, not denominated in dollars? (It could be that I am ignorant and the Dow really is denominated in dollars–but this fact is never shown in the Western media. Clue me in if I’m wrong).
This figure was not said to be what it is: the DJIA. Sloppy, sloppy, sloppy.
The Tokyo Stock market index is denominated in yen, so this is likely the psychological source of the error. Still, I can’t believe that reporting this bad could be done by NHK. I also don’t know whether they make this mistake all the time, or is this perhaps just a one-off error. I think I would have noticed it before, but who knows.
You are correct in that the DJIA is NOT figured in dollars.
It is a price-weighted average. The Dow is figured by adding the prices of the 30 stocks in the average and dividing by the Dow divisor. Basically, the divisor accounts for changes due to stock splits and dividends and is constantly changing.
To read more about the divisor and how the DJIA is figured, go here.
From the Chicago Board of Trade (which trades Dow Futures):
Methinks the NHK mistake was transfer of info: the Nikkei is in Yen, so the Dow must be in dollars. Chalk it up to a lazy reporter/copy editor.
If this was a “business” piece done during the main news broadcast, then all bets are off concerning accuracy. Hell, I can’t even imagine how bad a US show could bungle up a Japanese business report. Providing the show wasn’t on CNBC, of course!
Interesting - NHK doesn’t seem to be alone in this practice. Check the business articles on CNN Japan, Nikkei, and Reuters Japan web sites. All the Dow Industrial Average figures are reported as dollars. This page specifically says USD.
First, if you take an amount in dollars (the sum price of the DJIA stocks) and divide by a constant, your result is still in dollars.
This is important to foreign investors as you need to relate changes in the index with changes in the exchange rate. To a Japanese investor, the DJIA going down by 1% when the yen goes up 1% vs. the USD doesn’t have the same value if the yen went down by 1%.
The Nikkei index was modelled on the Dow Jones approach and is calculated in a similar fashion. (Nikkei uses 225 companies instead of 30.) There’s no reason one should have a currency unit and not the other.
Although they need to mark that as the DJIA. Thanks all, esp. Jovan.