The NASDAQ National Market System Composite Index

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If the Dow is the establishment, the National Association of Securities Dealer Automated Quotations (NASDAQ) National Market System Composite Index is the workhorse of market indices. This index monitors common stock that is traded on the NASDAQ system (also known as over-the-counter stocks).

Plain English

The NASDAQ National Market System Composite Index is an index composed of over-the-counter stock that is being traded on the NASDAQ system. Owing to the type of stocks inherent in this market, it is considered to best represent younger , more mobile companies.

The index is compiled of stocks from the following six industries:

Banking	Insurance
Finance	Transportation
General Industry	Utilities

These industries are deemed to best represent the overall health of the American markets. However, because of the primary types of stocks listed on the NASDAQ, this index is considered to better represent more- speculative stocks, including startup companies in the preceding six industries.

This same qualifier, however, is also used as the reason why the NASDAQ best represents the market as a whole. The reasoning here is that smaller, less-established companies are quicker to feel the reverberations in the market. In addition, the sheer number of stocks listed on the NASDAQ (over 31,000) gives it the highest proportion of American stocks represented.

Note that although both indices are attempting to accurately represent the health of the American market, the Dow is composed of stocks that trade on the New York Stock Exchange and the NASDAQ lists stocks that trade over the counter. As a result, it quickly becomes obvious that these two indicators may not necessarily react similarly to the day's events. Differences in the mix of types and numbers of securities as well as the divisors used to compute the averages further widen these differences. In all fairness, the different indices generally behave similarly. However, the growing effects of international trading and the increasing volatility of many of today's markets, such as computer technology, have continually proved that the results of these different indices are not necessarily interchangeable, even when attempting to measuring the same markets.

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