Nasdaq started out as the National Association of Securities Dealers Automated Quotation system in 1971. Since then, it has grown to become the world's largest electronic stock market, and its former acronym has become its proper name. The listed companies are of different sizes and from different industries and regions of the world. Small companies often list first on Nasdaq before moving on to the bigger New York Stock Exchange. However, Nasdaq stocks are part of several market indexes, including such major ones as the Dow Jones industrial average and the Standard & Poor's 500.
As of publication, most Nasdaq companies are relatively small in terms of market capitalization. There were about 690 companies with a market cap under $50 million, 980 companies from $50 million to $300 million, 780 companies from $300 million to $2 billion, 220 companies from $2 billion to $10 billion and about 80 companies with a market cap greater than $10 billion. Only two — Microsoft and Apple — had a market capitalization greater than $200 billion. Only about 10 percent of the Nasdaq companies had market caps greater than $2 billion.
About 40 percent of the Nasdaq-listed companies were in the financial and technology industries as of publication. The financial industry subsectors include banks, savings institutions and insurance companies. The technology industry subsectors include semiconductors, software, data processing and computer equipment manufacturing. Another 40 percent or so of the companies were in the consumer services, health care, capital goods and consumer durable and nondurable industries. The remaining companies were in other industries, such as public utilities, transportation and energy.
Market indexes are useful for benchmarking the performance of investment portfolios. The Nasdaq Composite and the Nasdaq 100 indexes are the two main Nasdaq market indexes. The composite is a broad index that tracks all Nasdaq stocks, with the exception of mutual funds, preferred stocks and derivative securities. The Nasdaq 100 index tracks the largest 100 Nasdaq stocks, excluding companies in the financial industry.
Some investors consider the Nasdaq market to be more volatile than the NYSE. Large price swings are common for the broader market and for individual stocks, especially around earnings announcements. The volatility attracts short-term traders, such as day traders and momentum investors. The dot-com crash of early 2000 reinforced the risks associated with investing in new companies, especially those involved in rapidly changing technologies. However, the financial crisis of 2008 showed that large, well-established companies, even those trading on the venerable NYSE, are not immune to recessions and market downturns.