The best known American indices are SP500, Nasdaq and DowJones. In reality there are others such as the Russell. All indices are listed and maintained by NYSE (New York Stock Exchange) which in turn is organized and managed by ICE (InterContinental Exchange).
ICE was founded in 2000 with the aim of creating connections, exchanges of information, growth and development of electronic regulated markets. Then he takes care of organizing the Exchanges, DATA and various services.
Why are there different stock market indices?
The structure of the indices is different, different mathematical formulas. Overall, however, they tend to express the health of the market by identifying various nuances and details that otherwise would not be easily understood.
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Nasdaq 100 index
This is the index that has achieved the best performance compared to the others. The 100 most important NON-Financial companies are listed within this index. So if you want to get an idea of the health of the sectors related to the internet, new technologies, social media and e-commerce, then this is the index you need to study.
The index often welcomes innovative but low-capitalization companies that tend to grow quickly over time. This is the case of the FAANG titles [read this article] that is, Facebook, Apple, Amazon, Netflix and Google (now Alphabet). This is why the Nasdaq has been able to deliver extraordinary performances in recent years.
As you can see, the top 10 stocks are very important because they represent almost 50% of the weight of all the other 90 listed. In particular, Apple, Amazon and Microsoft contend for the primacy.
Sp500 index
The SP500 is the most important American index because it is a worldwide reference for investors, hedge funds and retail traders who want to invest in American equities. The index represents between 70% and 80% of the capitalization of companies listed in the USA.
It was born in 1862 and is 159 years old (as of 2021) even if the formula with which it is calculated today was reworked in 1957, expanding the companies from 90 to 500.
The shares in the index must have a value greater than 1 dollar.
The official trading hours are from 9:30 to 16:00 USA which corresponds to the Italian hours 15: 30-22: 00. These times also apply to the other indices.
Index futures, on the other hand, are subject to almost continuous 24-hour trading, i.e. only short breaks of some 15-20 minutes are provided.
At the moment, the top 10 representative stocks of the SP500 index are listed above with the obvious weight of Apple and Microsoft which alone account for almost 11% of the stocks.
DowJones Industrial
The Dow Jones index or more commonly called Dow (DJIA acronym). The index represents the 30 most important American companies in all sectors. It was born in 1970 and its task is to generate an idea about the health of the American economy.
The top 10 companies of the Dow Jones hold a weight of about 45% of the entire index.
The formula by which the weight of each company is calculated within the index does not refer to the total market capitalization but to the price of the single share. A share worth 200 usd has a greater weight than a share worth 30 usd. So if a company proceeds with the share split (method by which 1 share is divided into xx shares), it will lose weight within the index. It was the case of Apple which in 2020 made a share split going from first place to the current 22nd.
