What Is the Nasdaq Composite Index?
The Nasdaq Composite Index is a market capitalization-weighted index of more than 3,700 stocks listed on the Nasdaq stock exchange. As a broad index heavily weighted toward the important technology sector, the Nasdaq Composite Index has become a staple of financial markets reports.
Understanding the Nasdaq Composite Index
The Nasdaq Composite Index includes all equity securities listed on the Nasdaq Stock Market, including common stocks, ordinary shares, American depositary receipts (ADRs), units of real estate investment trusts (REITs) and publicly traded partnerships, as well as tracking stocks, Not eligible for inclusion are the securities of closed-end funds, exchange-traded funds (ETFs), preferred shares, rights, warrants, convertible debenture securities, or other derivatives.3
The Nasdaq Composite includes the stocks of companies headquartered abroad, in contrast with the S&P 500 Index and the Dow Jones Industrial Average, the two other most frequently cited market benchmarks.
Nasdaq Composite Index Methodology
The Nasdaq Composite Index uses a market capitalization weighting methodology.
The index's value is calculated by summing the market capitalization of the index components based on the stocks' current price.
This total is then adjusted a constant index divisor.
The index was launched on Feb. 5, 1971 with an index value of 100
The index is calculated constantly throughout the trading day and its value disseminated once per second from 9:30 a.m. to 5:16 p.m. ET. The closing value of the indexes may change up until 5:15 p.m. ET as a result to corrections to the last reported price for index components.
Two versions of the Nasdaq Composite Index are calculated: a price return index and a total return index. The total return index assumes the reinvestment of cash dividends distributed by companies included in the index.
1971
The year the Nasdaq Composite Index was launched. It had an initial value of 100.