The Nasdaq (National Association of Securities Dealers Automated Quotations) is the oldest and largest electronic stock market globally. All its buying and selling occurs electronically and not on a physical trading floor.
It is the second-largest stock exchange globally based on the market capitalisation of its listed companies.
Nasdaq is technically a dealer market. Both buyers and sellers trade with a market maker in a specific stock or security.
The Nasdaq Composite is more influential and widely followed, while the Nasdaq 100 is viewed by traders and investors interested in futures, options, and exchange-traded funds.
Both the Nasdaq Composite and Nasdaq 100 use the same modified market capitalization weighting method: Each share's closing price (LSP) is multiplied by the total shares outstanding (TSO).
Share weights calculation: Each security's market capitalization is divided by the total capitalization of all index securities. Share weights for each stock are then multiplied by that stock's closing price. The total is divided by an index divisor that accounts for market fluctuations. The result is the Nasdaq average for that day.
Nasdaq's indexes have outperformed the S&P 500 (it tracks large-cap stocks), and the Dow Jones Industrial Index (the 30 largest US companies).
It outperformed because both Nasdaq indexes lean heavily into tech, consumer services, and health care - the top-performing industries in recent years.
While you can try to duplicate the Nasdaq 100 or the Nasdaq Composite with individual stock purchases, it would be more efficient to invest in an index fund.
Nasdaq is also a public company that you can invest in. It trades as Nasdaq Inc.
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