This paper investigates a widely quoted stock market index, the Dow Jones Industrial Average (hereafter DJI), and constructs some alternative indices. Their performances are compared to the DJI. The question of applying the indices to problems of portfolio selection is explored when investors’ utility functions are quadratic in the rate of return. By constructing indices from data collected in diﬀerent time periods, some conclusions are drawn about the constancy of price and rate of return covariance and correlation matrices of the 30 Dow Jones Industrial stocks over time.
Feeney, George J. and Hester, Donald D., "Stock Market Indices: A Principal Components Analysis" (1964). Cowles Foundation Discussion Papers. 405.