NYSE vs Dow Jones: Difference and Comparison

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 stock market index tracks the top 30 equities of the world’s largest corporations. ‘The Dow’ refers to the Dow Jones Industrial Exchange.

Key Takeaways

1. NYSE is a stock exchange, while Dow Jones is a stock market index.
2. NYSE has more listed companies compared to Dow Jones.
3. Dow Jones is a price-weighted index, while NYSE is a market capitalization-weighted exchange.

NYSE vs Dow Jones

NYSE stands for the New York Stock Exchange, the world’s largest stock exchange by market capitalization. The Dow Jones Industrial Average, also known as the Dow, is a stock market index that tracks the performance of 30 large, publicly traded companies listed on the NYSE and NASDAQ.

The NYSE uses the Hybrid system, which was implemented following the Archipelago merger. Machines are used for trading the most liquid stocks, whereas Open Outcry is used for trading 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

Parameters of Comparison	NYSE	Dow Jones
Type	It is an exchange.	It is an index.
Firms	It is a place where thousands of firms trade.	It aggregates the top 30 biggest firms.
Main Work	Here investors can purchase & sell securities on an electronic marketplace.	Key index indicating stock market performance.
Existence	Founded in 1792 then transformed into NYSE between 1896 & 1901.	Founded in 1882 by three journalists.
Abbreviation	The NYSE stands for New York Stock Exchange	The 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 and mergers with Archipelago and Euronext. Also the first transatlantic exchange in history.

The NYSE, 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 unequalled in the financial markets.

Floor Brokers provide human oversight, 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 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 corresponding to more extensive business indices like the Russell 3000 or S&P 500 Index.

Index funds include many mutual funds and ETFs (exchange-traded funds), which hold the same equities as the index in the same amounts, mimic the index’s performance before fees and expenditures, and may be acquired through the 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 Dow is circulating the profits of the firms, 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.

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

Last Updated : 13 July, 2023