Take the Dow and pull Cisco, Kraft and Travelers out and put back in GM, Citi and AIG. What do you have?
13387 by my math (below). Yes the 3 replacements have done better, but they also effectively diluted the rest of the index more, which was where the real gain was.
This is assuming GM was just left as is (now $0) and not replaced with the new GM. Replacing with the new GM stock would reduce the number (not increase it as most would think).
i suspect the story in the SP 500 is similar in that the substitutions do not have the effect you think. They are taking out stocks that are low and adding stocks that are high.
The true disconnect between the DJI and broader measures is likely the high proportion of large multinationals in the DJI. CAT alone has contributed about $600 to the DJI rise since the '08 bottom.
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Current DJI: 12862 Present divisor: .13213 DJI "unadjusted" value: 1699.46 [DJI * divisor] Old DJI Unadjusted: 1640.87 [above + AIG + C - TRV - CSCO - KRF] '08 divisor: .12282 '08 divisor adjusted for Verizon 7/2/10: .12257 Old DJI: 13387
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