Time and time again, new trends replace old ones in the Dow. For example, take Cisco replacing General Motors in 2009 or Nike replacing Alcoa in 2013.
But this theory is not one to base your investing on, recent history shows.
"Lastly, while a negative in the near-term [for GE], we note that recent removals from the index have gone on to outperform the DJIA in the 12-months following the announcement," Goldman analyst Joe Ritchie said in a note to clients Tuesday.
The most recent removal before General Electric soundly outperformed the S&P 500 in the year after getting booted, according to CNBC data.
AT&T shares rose 15 percent in the 12 months after it was replaced by Apple in the Dow versus the S&P 500's 2 percent decline in the same time period.
Alcoa's stock soared even higher with a 96 percent return in the year after its exit.
It seems that by the time the index committee acts to remove an underperforming stock, most of the fundamental deterioration is already priced into the shares and so you see a rebound.
GE shares fell as much as 3 percent in after-hours trading following the decision Tuesday. After opening lower on Wednesday, the stock rebounded to near positive before closing down less than 1 percent.
Investors initially sold off GE shares perhaps due to the recent Wall Street concern over retail shareholder sentiment.
Deutsche Bank analyst John Inch had warned in January that GE would likely be dropped from the Dow this year and that such a move would hurt its shares.
"We believe headline risk to be the most significant risk factor if GE were to be dropped from the Dow — potentially amplified by GE's high mix of retail investors (roughly 40% of GE's common stock is held by retail investors)," Inch wrote.