Last week Apple (APPL: NASDAQ) was officially added to the Dow Jones Industrial Index. The Dow is an average indexed to the stock market performance of thirty large American companies. The average was first calculated in 1896 and has fallen out of favour with market watchers. Detractors say companies are chosen arbitrarily, for example Google and Facebook are omitted at the expense of older, smaller companies (as measured by market cap) such a P&G and General Electric.

The Dow is weighted to changes in a company’s share price, rather than overall changes in market capitalisation. Effectively, this means expensive stocks have a disproportionate effect on the index. Historically, Apple’s stock could not be included in the Dow for this reason– its 7:1 stock split in June 2014 brought the share price of the company down to ~$US120 from US$700, much closer to the price of other stocks in the average.

You can hear more about the Dow Jones Industrial Average on this week's Planet Money podcast here