The NASDAQ Composite index tracks the prices of all of the securities traded on the NASDAQ Stock Market.
That makes it a broader measure of market activity than the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500-stock Index (S&P 500).
On the other hand, many computer, biotechnology, and telecommunications companies are listed on the NASDAQ. So the movement of the index is heavily influenced by what's happening in those sectors.
The index is market capitalization weighted, which means that companies whose market values are higher exert greater influence on the index. Market capitalization, or value, is computed by multiplying the total number of existing shares by the most recent sales price.
So, for example, if a stock with 1 million shares increases $3 in value, it has a greater impact on the changing value of the index than a stock that also increases $3 but has only 500,000 shares.
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