Contents
Preface
The most important technology index in United States!! Do you know which index it is? That’s right!! It is the Nasdaq that is listed as the three major US stock indexes in the United States along with the Dow Jones and S&P 500!!
What is Nasdaq?
Nasdaq, the full name is NASDAQ Composite Index, is a stock index dominated by technology companies. In 1971, Nasdaq was founded in the world’s second largest stock exchange, the Nasdaq Exchange. Unlike the New York Stock Exchange, most of the companies listed on Nasdaq are related to “emerging high-tech industries” and “IT stocks”, covering a variety of popular technology industries (for example: software, biotechnology, semiconductors, etc.).
The features of Nasdaq
Simply put, Nasdaq is the leading index of the technology industry in the United States and even the world. It is the best index to participate in the growth of the technology industry. Nasdaq has a great return when booming. The boom in the technology industry fluctuates greatly, so the rise and fall of the Nasdaq composite index will be relatively larger. To put it simply, when it is rising, it rises more than others. On the contrary, when it falls, it also falls more than others. For example, in 2019, the S&P 500 index rose from 2,500 points to 3,200 points, an increase of about 28%, while the Nasdaq 100 index rose 42% in the same period.
What is the difference between the Nasdaq and the Nasdaq 100? What are the constituent stocks?
1. Nasdaq Composite Index
It refers to all the companies listed on the Nasdaq exchange. There are currently more than 3,000 companies, and the index is weighted according to the market capitalization weight. Generally, the Nasdaq you see on TV news reports refers to this index.
2. Nasdaq100 (Also known as the TECH100 Index in United States)
The Nasdaq 100 is an index of the 100 largest stocks from the Nasdaq Composite, which are excluding financial stocks. Most of the constituent stocks are similar to the S&P500, such as: Amazon, Apple, Google(Alphabet), Microsoft, etc. But the weights are very different. The top 3 companies account for almost 30% of the weight, and the top 10 companies have a total weight of more than 50%, the influence is concentrated in a few important technology stocks.
How is Nasdaq calculated?
Same with the S&P500, the Nasdaq is calculated using market capitalization weighting, which is adding up all market capitalizations to obtain the index market capitalization. Lastly, divide each company’s market capitalization by the index’s market capitalization to get the weighted average for that company. Hence, the larger the market value of the company, the more obvious the impact of stock price fluctuations on the index.
Nasdaq’s constituent picking benchmarks
1. Must be listed on the Nasdaq exchange (with the exception of stocks in constituent stocks prior to 2004).
2. It must be a non-financial company, and has been listed for more than 2 years (the top 25% of the market capitalization in the index for 6 consecutive months can be reduced to one year)
3. The average daily trading volume of stocks exceeds 200,000 shares
4. Not in bankruptcy proceedings
5. Submit quarterly and annual reports as normal
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