Expert: Paul Henneman - 4/22/2007

Question
Hi Paul:

I am trying to find about the theory that the Dow Jones Industrial Avg (DJIA) has averaged 9% a year in any given 10 year period since its inception.  If this is true, where can I find that reference on the internet.

Thank you.

Bill W

Answer
Bill,
   Thank you for this question. I am not familiar with this theory regarding the Dow Jones Industrial Average. It sounds like it could be right, but that is just a guess.
   I did some general google search, and could not locate any specific confirmation for this. I did however find this site:

http://djindexes.com/mdsidx/index.cfm?event=showavgIndexData

Here you can enter in the tables what you need, and get the annual returns for DJIA since inception in 1896. You then have to compute the returns and percentages yourself, but it should not be too hard. For example, you could start with the date January 1, 1900 with the open price, then use the closing price for December 31, 1910 and see what percentage gain. Do that just 10 times for the 10 decades in the century, and you should be able to tell if this theory of 9% average return a year for each 10 year period holds true.

If the above does hold true, to really test the theory you would want to try it several more times with different start dates, for example January 1, 1897 through December 31, 1907  thereby running your decade measurements on a different schedule. If you will end up with dramtically different results depending upon when you start your decade measurement, the theory would be dependent upon your start date. If it holds true no matter when you start your decades, that would be interesting!

The google search I had the most success with appeard to be 'Historical Dow Returns' if you want to dig a bit more.

I hope this helps, please do not hesitate to follow up if I can be of any additional service.

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com