What Is the NYSE Composite Index?
The NYSE Composite Index measures the performance of all common stocks listed on the New York Stock Exchange, including American Depositary Receipts issued by foreign companies, Real Estate Investment Trusts, and tracking stocks. 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.
The breadth of the NYSE Composite Index (NYA) makes it a far better indicator of market performance than narrow indexes that have far fewer components.
- The NYSE Composite Index is a trackable index that reflects the performance of all the stocks listed on the New York Stock Exchange.
- The NYSE Composite Index has a perception of quality due to strict listing requirements and global diversity due to the breadth of its holdings.
- The NYSE lists more than 2,400 companies, of which international companies constitute about one-third of total market capitalization.
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) its quality, as all constituents must meet the stringent listing requirements of the exchange, and (b) its global diversification, with international companies accounting for about one-third of market capitalization.
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
The New York Stock Exchange launched the composite index in 1966. It was relaunched in 2003 using a new methodology that is more in line with index methodology applied by popular broad-based US Indexes.
ICE Data Services is the index sponsor and administrator. Securities Industry Automation Corp maintained and calculated the index until 2003, when it was relaunched with the help of Dow Jones Indexes.
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. 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.