Difference Between NASDAQ and Dow Jones (DJIA)

NASDAQ vs Dow Jones (DJIA)
 

The Dow Jones Industrial average (DJIA) and NASDAQ Composite Index are indexes that track the movement of a number of different stocks. The DJIA is made of companies that are traded on the New York Stock Exchange while the NASDAQ index is composed of companies that are traded on the NASDAQ stock exchange. There also are a number of other factors that make these indexes quite different to one another. The article offers a comprehensive explanation on each and highlights these many differences between the two.

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) is one of the most widely used stock market indexes. The DJIA tracks 30 stocks from 30 large U.S. firms that are the major players in their respective industries. The companies that are included in the DJIA are companies that are traded on the New York Stock Exchange. Companies such as Microsoft and Exxon Mobil make up the DJIA, and the index is calculated by adding the price of the 30 stocks and dividing the total by a number known a Dow divisor. The DJIA was founded by Charles Down in 1896 and was made up of 12 stocks at the time. The DJIA is the most popular, best known, and most widely quoted market index.

NASDAQ Composite Index

The NASDAQ composite index tracks around 2500 stocks that are traded on the NASDAQ stock exchange. The NASDAQ composite index was founded in 1971 alongside the establishment of the NASDAQ stock exchange, the world’s very first computerized stock exchange. The NASDAQ composite index is followed by many professionals and investors since it coves a broader range of stocks and provides a more comprehensive view of the performance of the smaller and larger stocks. Alongside the index, NASDAQ also refers to the NASDAQ stock exchange in which over 5000 stocks are traded. NASDAQ is an electronic computerized stock market which was the very first of its kind to be established in 1971.

What is the difference between NASDAQ and Dow Jones?

The DJIA and NASDAQ Composite Index are similar to each other in that they are both stock market indexes in which the price movement of a number of stocks is tracked. The DJIA tracks a smaller number of stocks than the NASDAQ composite and, therefore, is not representative of the stocks of smaller firms. The NASDAQ tracks a larger number of stocks and is, therefore, preferred by professionals and investors. The DJIA is derived by using a method called the share price weighting method, in which the stocks that are priced the higher are given a higher rating. On the other hand, the NASDAQ composite is derived by taking into consideration the market capitalization of the stocks included. Another reason why the NASDAQ composite index can be more appealing is the manner in which it is calculated as opposed to the DJIA which can result in distorted figures. However, the DJIA still remains the most widely quoted index.

Summary:

NASDAQ vs Dow Jones (DJIA)

• The Dow Jones Industrial average (DJIA) and NASDAQ Composite Index are indexes that track the movement of a number of different stocks.

• The DJIA tracks 30 stocks from 30 large U.S. firms that are the major players in their respective industries.

• The NASDAQ composite index tracks around 2500 stocks that are traded on the NASDAQ stock exchange.

• The DJIA tracks a smaller number of stocks than the NASDAQ composite and, therefore, is not representative of the stocks of smaller firms. However, DJIA still remains the most widely quoted index.

• The DJIA is derived by using the share price weighting method, whereas NASDAQ composite is derived by taking into consideration the market capitalization of the stocks included.