The NASDAQ Composite Index is a market capitalization-weighted index that reflects the performance of all stocks listed on the NASDAQ stock exchange. The index value is determined by aggregating the market capitalization of each constituent company and dividing it by a divisor. This divisor is adjusted over time to account for stock splits, dividends, and other corporate actions, ensuring that these events do not artificially affect the index’s value. For example, if a company’s stock price increases, its market capitalization increases, leading to a higher index value, provided other factors remain constant.
Tracking the overall health and direction of the technology and growth sectors is a primary purpose. It serves as a benchmark for investment portfolios and is widely used by investors to gauge market sentiment and make informed decisions. Historically, the index’s performance has been closely watched as an indicator of innovation and economic expansion, particularly in technology-driven industries.
