Differences Between the Dow and NASDAQ Indexes
Updated Dec 26, 2018
A stock market index is a mathematical representation which is used to indicate the movement of a particular stock market based on the share prices of a select group of stocks. Represented as a single number, a stock market index value indicates how a sector- or theme-specific market or a broader-level all-inclusive market has moved.
The Dow and the NasdaqWhen one says 'The Dow is at 21,550, up 1.5 percent today compared to previous day,' or 'The Nasdaq-100 closed at 5,900, down 1,000 points since the year-ago,' they refer to the market movements as represented by the single value, and their corresponding change compared to previous day's (or other period's) corresponding value. A stock index may include as little as 10 stocks or as high as 5,000 stocks which constitute the stock index. For instance, SEM-10 is a stock index of Mauritius which is calculated based on stock price of only 10 stocks, while Wilshire 5000 index derives its value from 5,000 stock constituents.
'The Dow' and 'Nasdaq' are common terms that are referred by almost all of the participants of the stock market. They represent the stock market indexes of America. Both are commonly used to refer to an average value that is computed based on the price movements of a select basket of stocks.
Difference between the Dow and NASDAQThe following differences exist between the two leading indicators of the American stock markets:
◐ Dow usually refers to the Dow Jones Dow Jones Industrial Average and is represented by the ticker symbol DJIA. Multiple indexes have the word NASDAQ associated with their names, but the most commonly referred index is the NASDAQ-100. NASDAQ can at times also refer to the Nasdaq Composite Index which is another popular stock market indicator that comprises of around 4,000 stocks.
◐ Dow Jones index consists of top 30 stocks in terms of market value which trade on NYSE and NASDAQ stock exchanges, while NASDAQ-100 includes top 100 stocks by market capitalization that trade on the NASDAQ stock exchange.
◐ Dow is one of the oldest market indicators and it dates back to 1896, while the NASDAQ indices are relatively new and came into existence in 1985 after the NASDAQ stock exchange started operations.
◐ Dow includes industries from all industrial sectors, while NASDAQ index excludes financial companies and gives more preference to technology sector companies.
◐ Dow is based on price values of each constituent stock and uses a concept of divisor, while NASDAQ is based on market capitalization of each stock.
◐ Since the number of stocks in the Dow Jones is considerably less than that in the NASDAQ index, Dow is prone to much wider swings based on the performance of a few individual constituent stocks. While NASDAQ is still relatively stable with 100 stocks, it is still volatile compared to the larger S&P 500 index that has more than 500 constituents.
In summary, the following differences exist between the Dow Jones index and the NASDAQ index:
| Parameter||Dow Jones||NASDAQ|
|No. of Constituents||30||100
|Coverage||All Industry Sectors||All Non-financial Sectors
|Volatility||Relatively Higher||Relatively Lower
One must note that the term 'NASDAQ' also refers to a stock exchange, which is a popular American stock trading market place and is an abbreviated form of National Association of Securities Dealers Automated Quotations. All NASDAQ indices are owned, calculated and operated by the NASDAQ stock exchange. The Dow Jones index is owned, operated and calculated by S&P Dow Jones Indices LLC, a joint venture of S&P Global (SPGI
) and the CME Group Inc. (CME
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