The NASDAQ index measures the performance of the largest companies by market capitalization in the United States. Let's learn about how to calculate it with HVA. What is the NASDAQ index? through the article below.
What is the NASDAQ index?
What is the NASDAQ index? The NASDAQ index, which stands for National Association of Securities Dealers Automated Quotations System, is one of the largest stock exchanges in the world, rivaling the NYSE and Tokyo in terms of capitalization.
NASDAQ attracts investors with its low listing fee of only about 150,000 USD along with an automated trading system based on predetermined parameters. From an exchange specializing in listing stock prices, NASDAQ has developed into the first exchange to apply modern cloud technology to store and manage data information systems.
Some notable numbers about the NASDAQ floor:
- Operating in over 90 markets with 3,400 listed companies.
- Market capitalization exceeds $15 billion.
- Approximately 10,000 customers in over 50 countries worldwide.
Instructions on how to calculate the NASDAQ index
NASDAQ currently has two main indexes: NASDAQ 100 index and NASDAQ Composite. Let's HVA Learn about the characteristics and measurement methods of each of these indicators!
NASDAQ Composite Index
What is the NASDAQ Composite Index? The NASDAQ Composite, often referred to as NASDAQ, is an index that measures the volatility of more than 3,000 stocks traded on the NASDAQ exchange. The index includes seven major types of stocks:
- American Depositary Receipt (ADR).
- Common stock.
- Limited liability interest.
- Common stock.
- Real estate investment trusts (REITs).
- SBI Owner's Interest Shares.
- Stock Tracking.
Note: The NASDAQ Index excludes derivatives, preferred stocks, exchange-traded funds (ETFs), and debt securities.
The NASDAQ Composite is calculated using the market capitalization method, based on the formula:
Value of NASDAQ Composite = (Weight of each security x Closing price of security)/Divisor
Calculation method What is the NASDAQ index?
- Each security is assigned a percentage weight, based on the company's market capitalization.
- Any change in a company's stock price, stock split or merger, especially with large-cap companies, has a significant impact on the index.
- The divisor is used to ensure the index is consistent. If there is an event such as a company joining or leaving the exchange, merging or splitting the stock, the divisor will be adjusted.
Thanks to these methods, the NASDAQ Composite more accurately reflects the volatility of the stock market traded on the NASDAQ exchange.
NASDAQ 100 Index
The NASDAQ 100 is an index that measures the performance of the 100 largest non-financial companies listed on the NASDAQ exchange. These companies operate across a wide range of industries, primarily in technology and finance, making the NASDAQ 100 a global symbol of modern industry. Tech giants such as Apple, Meta (formerly Facebook), and Microsoft are all tracked by this index.
Companies selected for calculation NASDAQ 100 index Not only are the companies with the highest market capitalization, but they must also meet the following criteria:
- Listed exclusively on the NASDAQ.
- Listing period of at least 2 years (can be 1 year if meeting capitalization criteria).
- Has an average daily trading volume of at least 200,000 shares.
- Circulate complete quarterly and annual financial reports.
- No risk of bankruptcy.
Calculation formula NASDAQ 100 index:
Value of NASDAQ 100 = (Weight of each security x Closing price of the security)/Divisor
The divisor in the formula is adjusted similar to the calculation of the NASDAQ Composite to maintain consistency in the event of events such as stock splits or changes in the index's composition.
In addition to the two main indexes, the NASDAQ Composite and the NASDAQ 100, the NASDAQ exchange also has two sub-indexes:
- NASDAQ Biotechnology Index: Represents companies in the biotechnology and pharmaceutical industries.
- NASDAQ Financial 100: Measures the performance of financial companies, including banking, insurance, brokerage and mortgage companies.
What are the advantages of the NASDAQ index?
NASDAQ stock index is one of the largest and most prominent exchanges globally, favored by many investors for the following reasons:
Large proportion of technology industry
NASDAQ 100 accounts for 47,25% stocks in the science and technology sector, while the rest are in sectors such as telecommunications services, consumer goods, utilities and healthcare. Currently, NASDAQ is the largest exchange in the US and is in the top 3 largest exchanges in the world, gathering many leading companies. With a large proportion in the technology industry, all fluctuations of listed companies on the NASDAQ reflect the global economic situation. Therefore, investors always closely monitor fluctuations on the NASDAQ to be able to make timely and accurate decisions.
Risk mitigation
To be listed on NASDAQ, companies must comply with a series of strict criteria and regulations. In addition to capitalization, the stocks of companies must ensure liquidity, have a low risk of bankruptcy, transparent financial statements and be audited by reputable organizations. Therefore, when investing in stocks of companies listed on NASDAQ, investors are investing in businesses with strong management capacity and growth potential globally.
Balance the index with stock allocation
The final advantage of What is the NASDAQ index?? That is the way to allocate the proportion to help balance the stock portfolio. No company is allowed to account for more than 24% proportion in the index. In addition technology stocks, NASDAQ also includes many companies in the biotechnology, pharmaceutical and financial industries – key sectors with strong profit growth potential.
The difference between NASDAQ and Dow Jones indexes
Chief NASDAQ and Dow Jones indexes are all important indices of the US stock market and they are closely correlated with each other. However, each index has its own distinct characteristics, clearly shown through their trading methods, range and volatility.
About trading
The Dow Jones is made up of only 30 stocks, so it is more susceptible to the performance of individual stocks than the NASDAQ. Currently, the top 10 stocks in the Dow account for more than half of the value of the index, so moves in just a few large stocks can have a big impact on the entire index.
In contrast, the NASDAQ has a larger number of constituent stocks, but a small group of stocks, especially the 10 largest stocks in the NASDAQ 100, account for more than 50% of the index's value. This creates a large gap, making the NASDAQ more susceptible to strong fluctuations, especially for select stocks.
About fluctuations
In terms of volatility, because the companies in the Dow Jones are all blue-chip companies such as Boeing, United Healthcare and 3M, with stable growth, the Dow Jones index is less volatile. In contrast, the NASDAQ is especially NASDAQ 100 index has more volatility because it tracks high-growth companies like Facebook, Amazon and Google, which come with a higher level of risk.
About the scope of the transaction
The difference between the Dow Jones index and What is the NASDAQ index?? NASDAQ tracks more than 3,300 stocks from a wide range of globally traded companies, primarily in the technology and internet sectors, although some are also in the financial, industrial and consumer sectors. Meanwhile, the Dow Jones tracks only the 30 largest US companies, most of which are traded on the NYSE, with a few listed on the NASDAQ such as Apple, Intel, Cisco and Microsoft.
Through the above article, you have better understood the concept. What is the NASDAQ index? and the advantages that make this exchange stand out. HVA hopes you will accumulate more useful knowledge and skills, becoming a trader. sustainable investment not only in the Vietnamese stock market but also worldwide.
