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What is the Nasdaq?

2 mins | Beginnner

What it is

The NASDAQ (National Association of Securities Dealers Automated Quotations) is a stock exchange located in the United States. It was founded in 1971 and is known for being the first electronic stock market. It is the second largest stock exchange in the world by market capitalization, behind the New York Stock Exchange (NYSE).

The NASDAQ is home to many technology and internet-based companies and is often used as a benchmark for the overall performance of the technology sector. Some well-known companies that are listed on the NASDAQ include Apple, Amazon, Microsoft, and Google.

It's also important to note that Nasdaq exchange itself consists of several indexes like NASDAQ composite (overall performance of all companies listed on Nasdaq), NASDAQ 100 ( top 100 companies by market cap listed on Nasdaq) and others.

How it works

The Nasdaq weights by market cap (the number of outstanding shares a company has multiplied by the share price), a setup that gives extra-large companies an extra-large impact. The Nasdaq is also heavily skewed toward tech companies, which account for nearly half the index's total value.

Why it matters

As the world's first electronic exchange, the Nasdaq has historically attracted more tech-focused companies. While the index tracks more stocks than the S&P and Dow combined, tech's heavy influence means the Nasdaq doesn't always illustrate how other industries are faring. The index can also be volatile because it includes more small, speculative companies.