The reasons for this change are set out below. Firstly, investors easily confused the average with the real price, despite the fact that the average was a theoretical arithmetic mean enlarged by applying a multiplier. Secondly, the average was not weighted and tended to be affected by price changes in a handful of smaller companies' stocks trading at high prices. Lastly, component stocks had hardly changed since 1949, except for occasional substitutions as a result of delistings and company mergers. Thus, it did not reflect changes in industrial structure, and therefore was not an appropriate measure of the market as a whole.
Investors can thus easily distinguish between theindex and real stock prices.
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