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Agreed - a price-weighted index like the DJIA doesn't make much sense for describing the aggregate behaviour of the constituents, even if it does attempt to adjust for stock splits.

A market-cap weighted index like the S&P 500 is probably a better measure.

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I don't know much about this, but I looked them up and it's interesting how well the two compare: https://www.google.com/finance?q=INDEXSP%3A.INX%2C+INDEXDJX%...

Yes, the calculation of the Dow Jones is a complete joke, but, funnily enough, it has tracked the fairly sensibly calculated S&P 500 surprisingly closely over time.

No, it hasn't. The two diverge greatly over long windows.

The correlation between SPX and the DJIA will generally be quite high, because sampling 30 stocks (and generally those with the biggest market caps) gives you a good estimate/representation.

As a result, over short periods of time, the spread between the two will be relatively small.

Over long periods of time however, the spread can be significant. See the following:

1. http://avondaleam.com/dow-jones-vs-sp/

2. http://www.thumbcharts.com/101035/DJIA-vs-S-P-500 (Compare 1, 2, 3 and 5 years)

FYI, the S&P500 is weighted by float (market cap available for public trading) and not market cap, per se.

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