What Is the NYSE Composite Index?

The NYSE Composite Index is an index that measures the performance of all stocks listed on the New York Stock Exchange. The NYSE Composite Index includes more than 1,900 stocks, of which over 1,500 are U.S. companies. Its breadth, therefore, makes it a much better indicator of market performance than narrow indexes that have far fewer components. The weights of the index constituents are calculated on the basis of their free-float market capitalization. The index itself is calculated on the basis of price return and total return, which includes dividends.

Key Takeaways

  • The NYSE Composite Index is a trackable index that reflects the performance of all the stocks listed on the New York Stock Exchange.
  • The index includes over 1,900 stocks, at least 1,500 of which are U.S. companies, as well as real estate investment trusts (REITs) and tracking stocks.
  • The NYSE Composite Index has a perception of quality due to strict listing requirements and global diversity due to the breadth of its holdings.

Understanding the NYSE Composite Index

The NYSE Composite Index includes all NYSE-listed stocks, including foreign stocks, American Depositary Receipts, real estate investment trusts and tracking stocks. The index excludes closed-end funds, ETFs, limited partnerships and derivatives.

The two biggest benefits to investors of the NYSE Composite Index are (a) it's quality, since all its constituents have to meet the stringent listing requirements of the exchange, and (b) its global diversification, with non-US companies accounting for more than one-third of market capitalization. NYSE-listed foreign companies have their headquarters in 38 different countries, with the most foreign issuers from Canada, China, the U.K., Japan, and Mexico.

The NYSE Composite Index is seen as a better stand-in for the broader stock market than many of its narrower counterparts, due to the number of constituents it has and the global diversity of its holdings.

How the NYSE Composite Index Works

According to the New York Stock Exchange, its composite index was first established in 1966. It was reintroduced in 2003 using a new methodology that is more in line with index methodology applied by popular broad-based US Indexes.

Currently, the NYSE Composite Index is calculated and maintained by S&P Dow Jones Indexes. Previously, the composite index was calculated by the Securities Industry Automation Corp.

Under the current methodology, the composite index no longer considers a variety of security classes eligible for inclusion: closed-end funds, ETFs, preferred stocks, derivatives, shares of beneficial interest, trust units, and limited partnerships.

The last trading price of the included securities is applied to calculate the composite index. Maintenance includes regular monitoring and adjustments made for companies that are added or deleted from the index as well as other actions including stock splits, corporate restructuring, and spinoffs.

Certain actions by companies, such as stock splits and stock dividends, may call for simple changes to be made in the composite index to account for common shares outstanding as well as stock prices for the included companies.

An index divisor adjustment might be required for other types of activity, including the issuance of shares, which lead to changes in the aggregate free-float adjusted market capitalization of the composite index.