Search
Close this search box.

Table of Contents

Nasdaq



Definition

The Nasdaq, which stands for National Association of Securities Dealers Automated Quotations, is an American stock exchange that primarily lists technology and internet-based companies. Founded in 1971, it was the world’s first electronic stock market, utilizing modern technology to facilitate quicker and more efficient trading. Known for its iconic market site in Times Square, New York City, the Nasdaq has become the second-largest stock exchange by market capitalization, after the New York Stock Exchange.

Phonetic

The phonetic pronunciation of the keyword “Nasdaq” is: /ˈnæzdæk/.

Key Takeaways

  1. Nasdaq, short for National Association of Securities Dealers Automated Quotations, is an American stock exchange founded in 1971, predominantly dealing in technology and internet-based companies.
  2. It is the world’s second-largest stock exchange by market capitalization, after the New York Stock Exchange (NYSE), featuring a large number of high-tech giants like Apple, Microsoft, Google, and Amazon.
  3. Nasdaq operates as an electronic platform, utilizing modern trading technology and highly efficient trading systems, allowing for a faster, more transparent, and cost-effective exchange experience.

Importance

The NASDAQ (National Association of Securities Dealers Automated Quotations) is a crucial aspect of the global financial landscape, as it is one of the world’s largest and most well-known stock exchanges. It plays a vital role in providing a fair, transparent, and efficient marketplace for investors and companies to trade stocks, particularly those belonging to the technology, biotechnology, telecommunications, and media industries. The NASDAQ Index, which comprises a wide range of companies listed on the exchange, serves as a key economic indicator of performance and confidence in these sectors, influencing investment decisions, policy-making, and market analysis. Furthermore, the NASDAQ’s technological advancements and electronic trading platform have revolutionized the way securities are bought and sold, contributing to greater efficiency, speed, and accuracy in stock trading.

Explanation

The Nasdaq serves a pivotal role in the global financial ecosystem as a marketplace for buying and selling securities, specifically catering to technology and innovative growth-oriented companies. Established in 1971, the Nasdaq was the world’s first electronic stock exchange that facilitated trading through an intricate network of computers rather than using the conventional trading floor method. One of its critical purposes is to provide a platform that is transparent, efficient, and enables a seamless trading experience for investors. This technological approach ensures that participants have access to real-time data, ensuring that decisions can be made promptly and effectively. Furthermore, Nasdaq caters to a diverse array of listings, including large-cap, mid-cap, and small-cap companies, addressing the needs of various types of investors who can diversify their portfolios and manage risk. In addition to providing a trading platform, Nasdaq also plays an essential role in maintaining market integrity and supporting corporate governance. It constantly monitors the listed companies for compliance with listing requirements and sets high standards for them to maintain investor confidence. The Nasdaq indices, such as the Nasdaq Composite and the Nasdaq 100, are widely used as benchmarks to measure the overall performance of the technology and innovation sectors. These indices provide a valuable source of information for analysts, fund managers, and investors who use it for making informed decisions based on market trends and insights. Thus, the Nasdaq remains an indispensable resource for the global financial community in driving economic growth, fostering innovation, and ensuring a transparent market environment for all participants.

Examples

The NASDAQ (National Association of Securities Dealers Automated Quotations) is an American electronic stock exchange where stocks and various financial instruments are traded. Here are three real-world examples related to NASDAQ: 1. NASDAQ Listing: In May 2002, food and beverage company PepsiCo, Inc. was listed on NASDAQ, changing its stock exchange listing from the New York Stock Exchange (NYSE) to the NASDAQ Global Select Market. This allowed the company to benefit from the faster trade execution and cost-saving benefits of the electronic exchange. 2. The NASDAQ Composite Index: The NASDAQ Composite is a stock market index that represents all the stocks that trade on the NASDAQ stock market. Companies like Apple, Amazon, and Microsoft are commonly known for forming part of this index. The NASDAQ Composite is often used as an indicator of the performance of the technology sector as it is heavily concentrated with tech companies. 3. NASDAQ’s role in the Dot-com Bubble: In the late 1990s and early 2000s, the NASDAQ experienced a rapid surge in the value of technology stocks during the dot-com bubble. Many internet-based companies saw their market valuations increase exponentially due to investor hype, but ultimately collapsed as the dot-com bubble burst in 2000. The NASDAQ Composite reached a peak of 5,048.62 in March 2000, only to fall dramatically after the burst, reaching a bottom of 1,114.11 in October 2002. This period emphasized the need for careful analysis of financial statements and business models among investors.

Frequently Asked Questions(FAQ)

What is Nasdaq?
Nasdaq, an acronym for National Association of Securities Dealers Automated Quotations, is an American stock exchange located in New York City. It is the second-largest stock exchange in the world by market capitalization, after the New York Stock Exchange (NYSE). Nasdaq’s key function is to enable the trading of stocks and securities electronically and serve as a marketplace for companies seeking to raise capital through the issuance of shares.
When was Nasdaq established?
Nasdaq was founded on February 8, 1971. It became the world’s first electronic stock exchange and revolutionized trading by providing an efficient and transparent platform for buying and selling securities.
What types of companies are listed on Nasdaq?
Nasdaq is well known for being the primary stock exchange for technology and internet-based companies, including giants like Apple, Amazon, Microsoft, and Facebook. However, it also lists companies from various other sectors such as finance, healthcare, and consumer goods. Nasdaq consists of three market tiers: the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market.
What is the Nasdaq Composite Index?
The Nasdaq Composite Index is a market-capitalization-weighted index of over 3,000 companies listed on the Nasdaq stock exchange. It includes common stocks, real estate investment trusts (REITs) and American depositary receipts (ADRs) among others. The index is widely used as a measure of the performance of the technology sector and growth companies in the stock market.
How can I invest in Nasdaq-listed stocks?
To invest in Nasdaq-listed stocks, you can either purchase individual stocks through a brokerage account or invest in exchange-traded funds (ETFs) or mutual funds that track the Nasdaq Composite Index or specific sectors within the index. It’s important to thoroughly research each company and consider factors like risk tolerance and financial goals before making any investment decisions.

Related Finance Terms

Sources for More Information


About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More