ABSTRACT
Prior to the mid-1970s, indexes were used primarily to track the performance of financial markets in the aggregate, not as the basis for investment vehicles. The first stock index was created by Charles Dow in 1884. The Dow Jones Transportation Average was established primarily to track the performance of railroad stocks, which dominated the stock markets at that time (Dow Jones 2014). In 1896, the Dow Jones launched its Industrial Average index to reflect the growing role of other large industrial companies in the economy (Dow Jones 2013). In 1923, Standard & Poor’s created the first of its indexes with 233 U.S. stocks. Three years later it began daily publication of the capitalization-weighted 90 Stock Composite Price Index and then introduced its Standard & Poor’s 500 Stock Index in 1957 (Standard & Poor’s 2009).
