Blue chip (stock market)

A blue chip is stock in a corporation with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times.[4][5]

For other uses, see Blue chip.
Replica of an East Indiaman of the Dutch East India Company/United East India Company (VOC). The Dutch East India Company was the first corporation to be listed on an official stock exchange.[1][2] In Robert Shiller's words, the VOC was "the first real important stock" in the history of finance.[3] The VOC was possibly, in fact, the first ever blue-chip stock in its modern sense.
Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser in Dutch) and the world's first formal stock market in the 1600s.

Origin

As befits the sometimes high-risk nature of stock picking, the term "blue chip" derives from poker. The simplest sets of poker chips include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $25.

In 19th-century United States, there was enough of a tradition of using blue chips for higher values that "blue chip" in noun and adjective senses signaling high-value chips and high-value property are attested since 1873 and 1894, respectively.[6] This established connotation was first extended to the sense of a blue-chip stock in the 1920s.[7] According to Dow Jones company folklore, this sense extension was coined by Oliver Gingold (an early employee of the company that would become Dow Jones) sometime in the 1920s, when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at $200 or $250 a share or more, he said to Lucien Hooper of stock brokerage W.E. Hutton & Co. that he intended to return to the office to "write about these blue-chip stocks". It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks.[8]

United States

The most popular index that follows United States blue chips is the Dow Jones Industrial Average, a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. All companies in the Dow Jones Industrial Average are blue-chips, but the Dow Jones Industrial Average is an index that does not include all companies that are blue chips. Nevertheless, it has been a widely followed indicator of the stock market since October 1, 1928.[9]

See also

References
  1. Petram, Lodewijk: The World's First Stock Exchange: How the Amsterdam Market for Dutch East India Company Shares Became a Modern Securities Market, 1602–1700. Translated from Dutch by Lynne Richards. (Columbia University Press, 2014, ISBN 9780231163781)
  2. Stringham, Edward Peter; Curott, Nicholas A.: On the Origins of Stock Markets [Part IV: Institutions and Organizations; Chapter 14], pp. 324-344, in The Oxford Handbook of Austrian Economics, edited by Peter J. Boettke and Christopher J. Coyne. (Oxford University Press, 2015, ISBN 978-0199811762)
  3. Shiller, Robert: The United East India Company and Amsterdam Stock Exchange, in Economics 252, Financial Markets: Lecture 4 – Portfolio Diversification and Supporting Financial Institutions. (Open Yale Courses, 2011)
  4. "NYSE Group, Inc". Nyse.com. Archived from the original on 2012-10-17. Retrieved 2011-09-19.
  5. Blue Chip Definition Investopedia
  6. Merriam-Webster, Merriam-Webster's Unabridged Dictionary, Merriam-Webster.
  7. Merriam-Webster, Merriam-Webster's Collegiate Dictionary, Merriam-Webster.
  8. Prestbo, John (12 March 2008). "Ever Wonder How 'Blue-Chip' Stocks Started?" (PDF). Dow Jones (internal news item). Retrieved 22 June 2018.
  9. "Dow Jones Industrial Average: Stock Index Summary". Bloomberg. 1928-10-01. Retrieved 2011-09-19.
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