14 DAY TRIAL // The Dow Jones Industrial Average has recorded its first composition changes since 2004. Some companies were invited while others were not, it's an ongoing epopee about interest groups and politics. However, apolitical but extremely strong Google was not invited to be a part of the standard.
Canada's Globe and Mail quotes John Prestbo, an editor of Down Jones Indexes, as telling journalists that the Mountain View-based company was not considered because it is another tech company, and they already have enough of those: tech "seems to be at about the right weight in the Dow compared to the market as a whole, so we did not make any moves in that regard at this time," he said.
Another more likely explanation is that the Dow is actually price-measured, meaning that the higher a company's stock price, the more influence it has, in comparison to lower priced ones. When you think about Google being valued somewhere around $500, the real picture starts falling into place. The other markets in general have a market-cap approach to the same problem, in other words, the larger the company, the more "sway" it will hold, no matter what its stock price is.
If Google were to enter the Dow, it would instantly overpower and overwhelm all the other constituent members and that would turn it pretty much useless as a benchmark, should changes in the stock occur.
The Dow Jones Industrial Average (also called the DJIA, Dow 30, or informally the Dow Jones or The Dow) is one of several stock market indices created by nineteenth century Wall Street Journal editor and Dow Jones & Company co-founder, Charles Dow. Dow compiled the index as a way to gauge the performance of the industrial component of America's stock markets. It is the oldest continuing U.S. market index, aside from the Dow Jones Transportation Average, which Dow also created.