NASDAQ Composite

Definition

The term NASDAQ Composite refers to a stock market index first created back in 1971 by NASDAQ, a global financial technology, trading and information services provider.  The NASDAQ Composite is one of several indices believed to be an indicator of the general health of the stock market.

Explanation

The NASDAQ Composite is a portfolio of nearly 3,000 common equites believed to be representative of the entire stock market.  An electronically traded fund (ETF) NASDAQ: ONEQ provides investors with an opportunity to receive a return on investment that matches the overall performance of the index.  Performance of the composite can be found using the stock ticker COMP.

The index includes large companies, as measured by market capitalization, and includes both dividend-paying securities as well as growth stocks.  Securities included in the NASDAQ must be listed exclusively on the NASDAQ Stock Market.  Unlike the S&P 500 Index, which only contains common stock, securities included in the NASDAQ Composite include American Depository Receipts (ADR), common stock, Limited Partnership Interests, Real Estate Investment Trusts (REITS), Shares of Beneficial Interest (SBI) as well as tracking stocks.

The index is calculated using market capitalization, which means that stocks with higher market capitalization values have a larger impact on the movement of the index. A divisor is used to maintain the stability of the index and adjusts for various financial actions such as stock splits, dividend payouts, and divestitures.  The value of the index is updated every second during the trading day.  An end of day value is calculated at 4:16 p.m. EST.

On March 10, 2000, the NASDAQ Composite hit a record high of 5,132.52. On October 9, 2002, following the bursting of the dot com bubble, the index would fall to 1114.11, a loss of 78% from the March 2000 record high.

Related Terms

buying the index, NASDAQ 100 Index, NASDAQ Capital Market Composite, NASDAQ Financial-100 Index, NASDAQ Computer Index, S&P 500 Index