An Overview of the NASDAQ Stock Market Indices

The Nasdaq stock indexes are a collection of more than 20 company pools which are with the exception of the Nasdaq-100 Equal Weighted Index, mostly measured using a form of weighted averaging. Some examples of Nasdaq stock market indices are Nasdaq China Index, Nasdaq Industrial, Nasdaq-100, and Nasdaq Computer. The majority of these indicis measure a unique collection of companies based on outstanding shares and current stock price and the index values are presented in the form of an ongoing numeric value and/or graphical chart over a period of time. Many of the companies listed in the Nasdaq indicis are traded on the Nasdaq stock exchange.

History of Nasdaq Indicis:

The first Nasdaq index, the Nasdaq composite index was began in 1971, around the same time the Nasdaq began. Since then several more indicis have been added; a complete list can be found on the second link at the bottom of this article. Some of the more recent index listings began as recently as May 2007. Two of the more recent indicis to be added to Nasdaq are the Nasdaq China Index and the Nasdaq-100 Technology Sector Index. Some of the older indicis have collected enough historical data to assist researchers and analysts in the development of hypotheses regarding sector and economic behavior over time and different economic conditions.

How Nasdaq Indicis are used:

Each Nasdaq Index provides a measurement, also called a 'metric' that indicates an overall movement of several companies either up, down or sideways over a period of time as short as a minute and as long as several years. These metrics help individuals in the financial services industry, hedge fund managers, portfolio managers, and others to make more informed decisions regarding investment decisions in the following ways:

•Gage corporate group performance under certain economic conditions ex-supply shortage of a raw material.
•Assess general movement of a particular market over the short and long run.
•Monitor and track current investments.
•Determine competitiveness of sectors and/or companies within a sector.
•Demonstrate investment strategy success and/or the need to adjust portfolio.

Nasdaq Indicis as a Measurement Tool:

Like many tools, the Nasdaq Indicis are limited in scope and function. While they provide useful and essential information regarding stock trends they do not provide specific corporate information such as fundamental financial performance and developments in both the corporate and economic environment. The data from the indicis can be statistically analyzed to provide more thorough and useful explanation of movements in index value, however they do not provide a complete technical profile of the companies within the index.

The financial World would probably be at a loss without broad indicis such as those provided by Nasdaq and these indicis are a primary navigational tool in the investment world. The information in these indicis is both useful and beneficial but does have reasonable limitation. The Indicis have and are continued to be used for several purposes including corporate recognition, stock fund management, financial and economic analysis and financial services.

Sources:

http://dynamic.nasdaq.com/services/indexes/default.aspx
http://dynamic.nasdaq.com/reference/IndexDescriptions.stm