Difference Between DJIA and NASDAQ

Edited by Diffzy | Updated on: April 30, 2023

       

Difference Between DJIA and NASDAQ

Why read @ Diffzy

Our articles are well-researched

We make unbiased comparisons

Our content is free to access

We are a one-stop platform for finding differences and comparisons

We compare similar terms in both tabular forms as well as in points


Introduction

It is critical to learn the fundamentals before getting started. This is also true for newcomers to the stock market. Simply said, a stock market is a gathering place for buyers and sellers to trade equities. People used to meet at the trading ring to purchase and sell stocks before the internet. All trades are now conducted using computer terminals at brokers' offices. Furthermore, the terms "stock market" and "share market" are interchangeable. Stock markets are inherently volatile. Like any other market, the stock market has buyers and sellers, as well as goods (shares of companies) that are exchanged for a price. This dynamism stems from changing company fundamentals, changes in the macroeconomy – both domestic and international, and changes in market sentiment, which cannot be explained and at times has no rational basis. The products, on the other hand, are not sought for their own sake, but rather as a means of increasing money to boost future consumption. It has drawn swarms of people from all walks of life, with all levels of knowledge and education, whose sole goal is to make money quickly and in large amounts.

A stock market's environment is tightly controlled and monitored. By bringing together hundreds of thousands of market participants who wish to buy and sell shares, the stock market fosters fair pricing and transaction transparency. Unlike earlier stock exchanges that issued and traded actual paper share certificates, today's computerized stock exchanges are completely electronic. Through an initial public offering (IPO), corporations can issue and sell shares to the general public for the first time (IPO). This practice aids businesses in receiving the necessary cash from investors. It essentially means that a corporation divides itself into several shares (for example, 20 million) and sells a portion of those shares to the general public at a set price (for example, $10 per share). To make this procedure easier, a firm will need a marketplace where these shares can be sold. This market is provided by the stock exchange. The firm will be able to sell 5 million shares for $10 each and earn $50 million if all goes according to plan. Investors will obtain company shares, which they can expect to hold for the time of their choosing in the hopes of an increase in share price and dividend payments. The stock exchange serves as a facilitator for this capital-raising process, and the company and its financial partners pay a fee for it. Many magazines, journals, websites, and television channels make an honest effort to convey an overview of the sector regularly. On the other hand, they provide analytically ambiguous short-term, frequently instantaneous, viewpoints on market movements. Reputable brokers can offer valuable market insight as well as warn investors about market pitfalls and dangers. They are, nevertheless, likely to have failed to provide the required education. The stock market obsession may require no formal education. People like to conceive of it as a wager, with a predetermined outcome and a probability that cannot be reduced by education.

The Indian stock market has caught the attention of both domestic and international investors, and it is regarded as one of the most active markets in the world. The country's economy boasts one of the greatest growth rates in the world, and its future potential has attracted global investors. However, it is also true that the diverse domestic clientele in this industry has neither the desire nor the ability to comprehend the numerous components of this business, as they are solely motivated by the need to make money quickly.

In a nutshell, stock markets provide a safe and regulated environment in which market participants can confidently trade shares and other qualified financial instruments with little to no risk of losing money. The stock markets operate as primary and secondary markets, according to the guidelines set forth by the regulator.

DJIA vs. NASDAQ

Both "the Dow" (DJIA) and "the NASDAQ” refer to stock market indexes in the United States: listings of stocks from various industries that investors can follow. Both are frequently followed and cited, to the point where they are occasionally confused with the stock market or the US economy in general—which they aren't. Instead, they are hypothetical snapshots of the stock market that might provide investors with an indication of how the stock market or the economy is going.

  • Both the Dow and NASDAQ are stock market indices or averages of a large number of values obtained from stock price changes.
  • NASDAQ is also the name of a stock exchange where investors can purchase and sell equities.
  • The Dow and the NASDAQ do not refer to the stock market or the economy, but they are frequently regarded as indicators of both.
  • Because the Dow and NASDAQ indexes are statistical averages of the performance of a grouping of firms, investors cannot trade them.
  • Investors can, however, buy index funds that mirror these indexes, which might be mutual funds or exchange-traded funds (ETFs).

Difference Between DJIA vs. NASDAQ in Tabular Form

 

Parameters of Comparison

DJIA NASDAQ
Abbreviation Dow Jones Industrial Average National Association of Securities Dealers Automated Quotation
Existence The earlier index, designed by Charles Dow in 1896, was established. The new index was created in 1971, although it is currently only available on an electronic stock exchange.
Index/Exchange Exchange as well as an index. Only 30 big corporations are included in the index.
Meaning The key index measures the performance of the stock market. An online marketplace for investors to buy and sell assets.
Bases of the Company Dow Jones is a price-weighted average index, which means that when determining the average price, any stock splits or modifications are ignored. The NASDAQ is based on a company's outstanding stock value as well as the market capitalization of several other companies.

What is DJIA (Dow Jones Industrial Average)?

The DJIA was founded in 1896 with only 12 American enterprises, all of whom were mostly manufacturers. The index has evolved to mirror the economy, and it currently includes firms from a variety of areas, including technology, health care, and retail. When one or more index components go bankrupt, making them less prominent in their industry, or when the economy undergoes a significant transition that must be reflected in the index's composition, the index changes. The Dow Jones Industrial Average is frequently seen as a leading indicator of the stock market's and economy's progress in the United States. The Dow Jones futures and the Industrial Average represent easy, flexible trading. Market and economic developments have provided opportunities. Charles Dow, Edward Jones, and Charles Bergstresser, not the three individuals, created Dow Jones & Company in 1882. In the early years, Charles Dow and Edward Jones ran the company individually, earning a reputation for integrity. Clarence Barron and Jessie Waldron bought the company after Dow died in 1902, and control passed to the Bancroft family. Bancroft’s sold Dow Jones & Company to News Corp. in 2007. Dow Jones & Company was still an important financial news source in 2020. Market Watch, Barron's, and, of course, The Wall Street Journal were among its periodicals. These financial news outlets remained mostly unaffected by News Crop.

Dow Jones is frequently confused with the Dow Jones Industrial Average (DJIA). The DJIA, also known as "the Dow," is one of the most closely followed stock indexes in the world, with businesses like Apple, Boeing, Microsoft, and Coca-Cola among its constituents. The DJIA began with only 12 enterprises, most of which were in the industrial sector. It eventually expanded to 30 companies. Railroads, cotton, gas, sugar, tobacco, and oil were among the first businesses established. The success of industrial businesses is sometimes equated with that of the wider economy, making the DJIA a crucial indicator of broader economic health. Even though the economy's health is now linked to many other sectors, the DJIA remains a key indicator of the US economy's health.

How DJIA Works

The DJIA was created to follow the movements of the country's most prominent industrial companies. It uses a price-weighted index, which means that stocks with higher share prices have a higher index weight than equities with lower share prices. The averages were initially derived by multiplying the stock prices of the 12 firms by 12. The index's formula was later tweaked to represent each component's relative relevance as a percentage of the total value of the index.

What is NASDAQ (National Association of Securities Dealers Automated Quotation)?

The Automated Quotations Stock Market of the National Association of Securities Dealers is an American stock exchange situated in New York City. After the New York Stock Exchange, it is rated second on the list of stock exchanges by market capitalization of shares traded. NASDAQ, Inc., which also owns the NASDAQ Nordic stock market network and many U.S.-based stock and options exchanges, owns the exchange platform. The National Association of Securities Dealers (NASD), currently known as the Financial Industry Regulatory Authority, was formed in 1971. (FINRA).  The NASDAQ stock exchange became the world's first computerized stock market on February 8, 1971. It started as just a "quotation system," with no way to execute electronic trades. The National Association of Securities Dealers (NASD), currently known as the Financial Industry Regulatory Authority, was formed in 1971. (FINRA).  The NASDAQ stock exchange became the world's first computerized stock market on February 8, 1971. It started as just a "quotation system," with no way to execute electronic trades.

Although the NASDAQ Stock Market eventually took over the majority of important trades previously done through the over-the-counter (OTC) system, numerous securities are still traded this way. Even as late as 1987, the NASDAQ exchange was still referred to as "OTC" in media reports and Standard & Poor's Corporation's monthly Stock Guides (stock guides and procedures).  It evolved into a stock market over time when trade and volume reporting and automated trading technologies were added. NASDAQ traded 37 percent of the 21 billion shares traded in the US stock exchanges in 1981. NASDAQ has almost 3,000 equities listed. A corporation must be registered with the SEC, have at least three market makers (financial institutions that operate as brokers or dealers for certain securities), and meet minimum asset, capital, public share, and shareholder requirements to qualify for listing on the exchange.

Companies may want to be listed on NASDAQ since it provides them with more funding and increases the liquidity of their stock. Only public firms can be listed on NASDAQ, which means they must undergo an Initial Public Offering (IPO) and comply with other Securities and Exchange Commission (SEC) standards. Furthermore, NASDAQ has its own listing rules. Meeting financial indicators such as market capitalization; satisfying liquidity standards, such as ensuring that a sufficient number of shareholders hold their shares unfettered; and following NASDAQ corporate governance regulations are all part of this. The listing requirements of NASDAQ can be found here.

Difference Between DJIA and NASDAQ In Points

  • Dow Jones Industrial Average (DJIA) is an internationally important stock market index. The National Association of Securities Dealers Automated Quotients Exchange, on the other hand, is an electronic exchange system.
  • The NASDAQ is a stock market index in the United States that includes about 3,000 companies. The DJIA, on the other hand, is comprised of 30 key industry leaders and stock market participants.
  • Apple, Google, and several other technology-based companies in their early phases are all listed on NASDAQ. The earnings of the firms are being circulated by DJIA, and they may be pulled if the stock prices fall.
  • The NASDAQ is determined by a company's outstanding stock value, which is based on the market capitalization of several companies. Dow Jones is a price-weighted average index, which means that when determining the average price, any stock splits or modifications are ignored.
  • The performance of the technology sector has a significant impact on the NASDAQ stock market's growth and decline. Nonetheless, in the case of the DJIA, the operation is centered on the 30 largest corporations as a group rather than individual stocks.

Conclusion

Although both the NASDAQ and the Dow are market indices, it is only the NASDAQ where investors can buy and sell equities. Furthermore, because the NASDAQ and DOW represent a mathematical average that consumers use to understand the market, an investor cannot trade on the indexes. Investors can instead buy index funds or exchange-traded funds (ETFs) (exchange-traded funds) although both the NASDAQ and the Dow are market indices, it is only the NASDAQ where investors can buy and sell equities. Furthermore, because the NASDAQ and DOW represent a mathematical average that consumers use to understand the market, an investor cannot trade on the indexes. Investors can instead buy index funds or exchange-traded funds (ETFs) (exchange-traded funds). It grew from niche and auction-style trading systems to become the global standard for modern trade. It became a go-to listing exchange and a hub for various tech-based businesses during the dot-com boom of the 1990s. NASDAQ began operations on February 8, 1971, and in 2006, it split from its parent company, NASD, to become a national securities exchange. Despite being one of the most prominent stock market activity trackers, the DJIA has some flaws. The DJIA, which comprises only 30 equities out of over 5,300 traded on the NASDAQ and NYSE, is not the best measure of how the whole market is performing. A representation of the overall stock market of less than 1% may be misleading and may not accurately reflect the current situation of the economy. Furthermore, the adoption of a price-weighted index rather than a market-weighted index favors some DJIA components over others.

References

  1. "Dow Jones Companies Sorted by Weight". Slick charts. Retrieved February 9, 2022.
  2. "Dow Falls 190; Drop Is Worst Since '87 Crash"Los Angeles Times. October 14, 1989. Archived from the original on July 29, 2020. Retrieved September 15, 2019.
  3. “NASDAQ Companies". Archived from the original on August 6, 2019.
  4. "Market Statistics - Focus". Focus.world-exchanges.org. The World Federation of Exchanges. March 2021. Retrieved April 14, 2021.

Category


Cite this article

Use the citation below to add this article to your bibliography:


Styles:

×

MLA Style Citation


"Difference Between DJIA and NASDAQ." Diffzy.com, 2024. Thu. 29 Feb. 2024. <https://www.diffzy.com/article/difference-between-djia-and-nasdaq-498>.



Edited by
Diffzy


Share this article