What is the 'Nasdaq Composite Index'

The Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 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'

The Nasdaq Composite is not limited to companies that have U.S. headquarters – something that sets it apart from a number of other indexes. 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 share 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 9, 2018, the industry weights of the Nasdaq Composite Index's individual securities are as follows: technology at 46.40%, consumer services at 20.16%, health care at 10.86%, financials at 8.59%, industrials at 6.32%, consumer goods at 5.49%, oil and gas at 0.71%, telecommunications at 0.70%, basis materials at 0.47% and utilities at 0.30%.

RELATED TERMS
  1. NYSE Composite Index

    The NYSE Composite Index serves as a gauge of the performance ...
  2. NASDAQ Global Market Composite

    The NASDAQ Global Market Composite is a stock market index of 1,45 ...
  3. Composite

    A composite is a grouping of equities, indexes or other factors ...
  4. Market Index

    A market index is a weighted average of a section of the stock ...
  5. Value Line Composite Index

    The Value Line Composite Index is a stock gauge containing approximately ...
  6. Nasdaq

    Nasdaq is a global electronic marketplace for buying and selling ...
Related Articles
  1. Insights

    How Nasdaq Makes Money

    NASDAQ provides a marketplace which offers money-making opportunities to investors. Investopedia explains how NASDAQ makes money.
  2. Investing

    ETF Tracking Errors: Protect Your Returns

    Tracking errors tend to be small, but they can still adversely affect your returns. Learn how to protect against them.
  3. Financial Advisor

    3 Fidelity Funds Rated 5 Stars by Morningstar

    Discover three Fidelity mutual funds that have received five-star overall ratings from Morningstar.
  4. Investing

    3 Types Of Indexing For ETF Success

    ETF success relies on the index with which it's paired. Discover three index genres for tracking average market performance.
  5. Investing

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  6. 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.
  7. Investing

    S&P 500 ETFs: Market Weight Vs. Equal Weight (RSP, SPY)

    Both S&P 500 and S&P 500 EWI indexes include the same set of stocks, but different weighting strategies give them separate individual properties.
  8. Financial Advisor

    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.
  9. Investing

    How to Use Index Funds to Diversify Your Portfolio

    Index funds can act as quality diversification tools.
RELATED FAQS
  1. What does the S&P 500 index measure and how is it calculated?

    Learn about what exactly the S&P measures and why it's used by market participants as a tool to understand the broader stock ... Read Answer >>
  2. Which benchmarks / indexes track the automotive sector?

    Explore some of the major benchmark equity indexes worldwide that analysts and investors use to track the performance of ... Read Answer >>
  3. How can I find out if a company I like is included in an index?

    Learn how to find out what indexes include a company's stock. Determine the importance of predicting future price movement ... Read Answer >>
  4. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    Discover some of the primary advantages and disadvantages that exist for companies listed on the Nasdaq exchange rather than ... Read Answer >>
Trading Center