Nasdaq Composite Index

What is the 'Nasdaq Composite Index'

The Nasdaq Composite Index is the market capitalization-weighted index of approximately 3,000 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities.

BREAKING DOWN 'Nasdaq Composite Index'

Unlike other market indexes, the Nasdaq Composite is not limited to companies that have U.S. headquarters. It is very common to hear the closing price of the Nasdaq Composite Index reported in the financial press or as part of the evening news because it is such a broad-based market index.

Nasdaq Methodology

The Nasdaq Composite Index uses a market capitalization weighting methodology. The index's value equals the total value of the shares weights of each of the constituent securities multiplied by each security's last price. This total is then adjusted by dividing by an index divisor, which scales the value to a more appropriate figure for reporting purposes. The index is calculated continuously throughout the trading day, but it is reported once per second, with the final confirmed value being reported at 4:16 p.m. each trading day.

Two versions of the Nasdaq Composite Index are calculated: a price return index and a total return index. The total return index includes the reinvestment of cash dividends on their respective dividend ex-dates. Both versions of the index include non-dividend cash distributions. On the market close of Sept. 24, 2003, both versions of the index were synchronized.

Changes in price due to corporate actions such as stock splits, stock dividends or spinoffs are made on the action's ex-date. Changes in total shares outstanding due to items such as conversions, stock repurchases, secondary offerings or acquisitions are usually made on the night before the action's effective date.

Eligibility requirements for the index are reviewed throughout the year. A security that does not meet the eligibility requirements can be removed at any time, usually at its last sale price.

Nasdaq Composite Composition

As of May 31, 2016, the industry weights of the Nasdaq Composite Index's 2,569 individual securities are as follows: basis materials at 0.46%, consumer goods at 5.89%, consumer services at 20.92%. financials at 8.05%, health care at 13.94%, industrials at 6.35%, oil and gas at 0.64%, technology at 42.49%, telecommunications at 1.15%, and utilities at 0.11%.

RELATED TERMS
  1. NYSE Composite Index

    An index that measures the performance of all stocks listed on ...
  2. NASDAQ Global Market Composite

    An index made up of stocks that represent the Nasdaq Global Market. ...
  3. Composite Index

    A grouping of equities, indexes or other factors combined in ...
  4. Broad-Based Index

    An index designed to reflect the movement of the entire market. ...
  5. Total Return Index

    A type of equity index that tracks both the capital gains of ...
  6. Value Line Index

    A stock index containing approximately 1,675 companies from the ...
Related Articles
  1. ETFs & Mutual Funds

    Index Investing: The Nasdaq Composite Index

    The Nasdaq Composite Index represents all the stocks that trade on the Nasdaq stock market. The recent surge in popularity of technological stocks has launched the Nasdaq into the spotlight. ...
  2. ETFs & Mutual Funds

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  3. ETFs & Mutual Funds

    Index Investing: What Is An Index?

    An index is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. It would be too difficult to track every single security trading in the ...
  4. ETFs & Mutual Funds

    Index Investing: Conclusion

    We hope this tutorial has given you insight into how you can track the market, use it as a benchmark and make investments. Some points to remember: An index is a statistical measure of the changes ...
  5. Markets

    Using Index Futures To Predict The Future

    Want to know whether the stock market will open up or down? Check out the index futures.
  6. ETFs & Mutual Funds

    Index Investing: Other Indexes

    We've covered most of the big U.S. indexes, but we've barely scratched the surface of all the other indexes in the world. There are literally thousands of indexes tracking nearly any market. ...
  7. ETFs & Mutual Funds

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  8. Investing

    The One ETF To Own The Top Internet Company Stocks

    Grab a pie of booming online businesses in one shot! Here is the one ETF that lets you own stock in the top Internet companies.
  9. ETFs & Mutual Funds

    The 4 Best U.S. Equity Index Mutual Funds

    Find out which four index mutual funds are among the best U.S. equities index mutual funds for core holdings in your investment portfolio.
  10. ETFs & Mutual Funds

    The 4 Best U.S. Large Cap Index Mutual Funds

    Discover the top four mutual funds that use passive investment approaches and follow stock indexes composed of U.S. large-cap equities.
RELATED FAQS
  1. What is the difference between the QQQ ETF and other indexes?

    Find out more about the PowerShares QQQ Trust, the index the QQQ tracks, and the difference between QQQ, the SPY and Nasdaq ... Read Answer >>
  2. Do you recommend the Nasdaq 100, S&P 500, or a 50/50 allocation?

    My job is now offering two large-cap stocks. The S&P 500 Index and Nasdaq 100 Index. I've read a bit about the debate ... Read Answer >>
  3. What are the most common market indicators to follow the U.S stock market and economy?

    Understand some of the key indicators analysts use to follow the U.S. stock markets and to assess the overall condition of ... Read Answer >>
  4. What are the most important equity market indexes?

    Discover the most important equity market indexes. Stock market indexes are tools to evaluate the performance of the stock ... Read Answer >>
  5. Why is the Nasdaq more heavily weighted to tech stocks than other stock exchanges?

    Learn how the Nasdaq attracts technology companies due to its focus on using advanced financial technology to improve the ... Read Answer >>
  6. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center