Difference Between NYSE and Dow Jones (With Table)

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The NYSE lists a wide range of equities and offers both floor and electronic trading or we can say the world’s largest stock exchange. The Dow Jones is a stock market index that tracks the top 30 equities of the world’s largest corporations. ‘The Dow’ refers to the Dow Jones Industrial Exchange.

NYSE vs Dow Jones

The difference between NYSE and Dow Jones is that The NYSE is an exchange where thousands of firms trade whereas the Dow Jones is an index, where people gather to buy and sell stocks. Dow jones aggregates the top 30 blue chip corporations in the economy. It offers an indicator of market performance.

The NYSE uses the Hybrid system, which was implemented following the Archipelago merger. Machines are used to trade the most liquid stocks, whereas Open Outcry is used to trade the least liquid equities on the floor. As a result, it is not as electronic as the NASDAQ.

The Dow was developed by placing the 30 equities that make up the index of the largest corporations into a group that is comparable in magnitude and company returns. When computers were not yet invented, a tiny sample of the top 30 companies was developed to track the whole market.

Comparison Table Between NYSE and Dow Jones

Parameters of ComparisonNYSEDow Jones
TypeIt is an exchange.It is an index.
FirmsIt is a place where thousands of firms trade.It aggregates the top 30 biggest firms.
Main WorkHere investors can purchase & sell securities on an electronic marketplace.Key index indicating stock market performance.
ExistenceFounded in 1792 then transformed into NYSE between 1896 & 1901.Founded in 1882 by three journalists.
AbbreviationThe NYSE stands for New York Stock ExchangeThe Dow Jones Stands for Dow Jones Industrial Average

What is NYSE?

The NYSE is the world’s largest stock exchange. It used to operate in a conventional auction method, but now mostly does business electronically. In terms of operations, I assume you still have specialists and an auction system; however, instead of humans, it is now mainly automated.

The NYSE originated in a room in 1792. It was founded on the Buttonwood Agreement, which was signed by 24 stockbrokers on what is now known as Wall Street. The corporation transformed into NYSE Euronext after enormous development between 1896 and 1901, as well as mergers with Archipelago and Euronext. Also, the first transatlantic exchange in history.

The NYSE, as the world’s largest stock exchange with an average daily volume of 2.4 billion shares, is also supported by a cutting-edge, dynamic technological infrastructure that is unequaled in the financial markets.

Human oversight is provided by Floor Brokers, and accountability is provided by Designated Market Makers (DMMs), who are required by law to maintain fair, orderly, and liquid markets in their assigned securities on the NYSE Trading Floor, the only in-person trading venue for a global equities exchange. This hybrid approach provides the best trading environment for securities by reducing volatility.

What is Dow Jones?

The Dow Jones Industrial Average also known as DJIA is a monetary-weighted score of the 30 biggest firms in the United States. After the Dow Jones Transportation, the DJIA or Dow Jones is the 2nd oldest index (not even sure if that still exists).

Three journalists founded the Dow 90 years later, in 1882. The Bancroft Family, which owns 105 percent of the company, recently sold it to News Corporation, which now owns 64 percent. At the time of selling, it was valued at $5 billion. The Dow Jones Industrial Average or DJIA is usually built for the best 30 NYSE stocks.

Despite the fact that the DJIA or Dow Jones Industrial Average, or the Dow belongs to be the most widely and oldest watched equity indexes. many people believe it is an incomplete presentation of the entire U.S. stock market when corresponded to more extensive business indices like the Russell 3000 or S&P 500 Index. Index funds include many mutual funds and ETF (exchange-traded funds) which hold the same equities as the index in the same amounts and mimic the index’s performance before fees and expenditures, may be acquired through any electronic trading platform or brokerage. State Street Corporation offers an (ETF) that tracks the index’s performance.

Main Differences Between NYSE and Dow Jones

  1. The NYSE is an exchange that allows investors and traders to buy and sell securities online without having to go to a physical trading floor, whereas the Dow Jones is an index that offers traders and investors a sense of how the market is doing.
  2. The NYSE is a US stock market index that includes thousands of businesses, whereas the Dow includes 30 big corporations that are industry leaders and significant contributors to the industry & stock market.
  3. The NYSE is mostly comprised of technology-based companies in their early phases of development. whereas The profits of the firms are being circulated by Dow, and they may be yanked off if stock prices fall.
  4. The NYSE is based on the market capitalization average of many firms on the index & the value of the company’s outstanding shares. whereas Dow Jones is a price-weighted average index, which means that no stock splits or adjustments are taken into account when calculating the average price.
  5. The NYSE stock market’s rise and fall are mostly determined by the performance of the technology sector whereas the Dow’s performance is based on the performance of the 30 biggest firms as a group rather than individual equities.

Conclusion

Market indices are referred to as NYSE versus Dow Jones, however, it should be emphasized that an investor may only buy and sell stocks on NYSE since it is also an exchange where stocks can be purchased and sold electronically. Furthermore, these indices are not tradeable since they only represent a limited number of companies based on the criteria discussed in this article (price-weighted and Market capitalization-based). Exchange-traded funds (ETFs) and index funds are two options for trading. The NYSE has seen everything, including the current manic collapse, as well as Black Thursday, Tuesday, and Monday. The market capitalization of the New York Stock Exchange in 2009 was US$10.8 trillion. The New York Stock Exchange (NYSE) is an auction-style market where most deals are executed by floor traders. The Dow Jones Industrial Average is normally made up of the top 30 NYSE stocks.

References

  1. https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/information-costs-and-liquidity-effects-from-changes-in-the-dow-jones-industrial-average-list/35B6ADE0706BC0CDDA0CC56C07D7BD76
  2. https://www.scitepress.org/Papers/2018/69221/69221.pdf
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