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. Nasdaq deals with several types of stock from goods to finances, but a significant number of stocks are within the technology sector.
Nasdaq includes a variety of stock in its exchange, but with it being an exclusively electronic market, it deals with a substantial amount of tech-related stocks.
Size and Market Capitalization
Most Nasdaq companies are relatively small in terms of market capitalization, compared to other exchanges. The listed companies on the Nasdaq website 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 a part of several market indexes, including such major ones as the Dow Jones industrial average and the Standard & Poor's 500.
The top four technology industries — Microsoft, Apple, Amazon and Google — have a market capitalization greater than $800 billion on Nasdaq. The other 3,456 companies of a variety of sectors have a market capitalization of less than $500 billion. As of March 15, 2019, Nasdaq market capitalization as a whole is $13.82 billion.
Specific Industry Analysis
A good amount of the Nasdaq-listed companies were in the technology industry as of 2019. The technology industry subsectors include semiconductors, software, data processing and computer equipment manufacturing. A close second were in the financial industry. Financial industry subsectors include banks, savings institutions and insurance companies. 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.
Exploring Major Indexes
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.
Other Important Considerations
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.
Based in Ottawa, Canada, Chirantan Basu has been writing since 1995. His work has appeared in various publications and he has performed financial editing at a Wall Street firm. Basu holds a Bachelor of Engineering from Memorial University of Newfoundland, a Master of Business Administration from the University of Ottawa and holds the Canadian Investment Manager designation from the Canadian Securities Institute.