Global Dow Index

The Global Dow index is an index, introduced in November 2008, designed to reflect the growth of major companies and smaller, fast-growing companies from around the world that do a significant amount of business both domestically and internationally. The stocks are selected by senior editors of the Wall Street Journal and from the Dow Jones Newswires from 3 major regions of the world. The Global Dow index was created to cater to institutional investors who were looking to diversify their investments around the globe as the United States' share of investments and growth potential diminishes.

The Global Dow is composed of 150 stocks from around the world, including emerging markets as well as the developed countries that have size, reputation, and the potential for growth. All 30 stocks from the Dow Jones Industrial Average (DJIA) are included as well as some from the Dow Jones Utility and Transportation indexes. The emerging countries that are included in the index, with a total 9% weight, are the BRIC countries (Brazil, Russia, India, and China) and Mexico. Emerging sectors such as alternative energy are also included.

The base value of the Global Dow is 1000 and the base date is December 31, 2000. The index is rebalanced every September, and the reconstitution of the index is done when needed, such as when there are major composition changes through mergers and acquisitions, for instance.

The stocks were selected from the Dow Jones Wilshire Global Total Market Index, which tracks 12,769 stocks in 65 countries. However, the Global Dow has more weight in Europe and Asia and a little less weight in the United States.

The Global Dow index is equally weighted rather than being based on price as the Dow averages are. An equally weighted index was selected so that smaller, fast-growing companies today will have more of an impact on the index. Furthermore, an equally weighted index lessens the influence of the wide disparity in global stock prices as well as the effects of currency exchange fluctuations. Equal weighting does make the Global Dow more volatile, with a standard deviation of 17.8% over the past 5 years compared to 15.4% for the DJ Wilshire Global Total Market Index and 13% for the S&P Global 100. The Sharpe ratio, which measures the return to risk, was 0.47 annualized versus 0.04 for the DJ Wilshire Global Total Market Index.

Bar chart showing the country allocation of the Global Dow index.
Pie chart showing the sector allocation of the Global Dow index.