Investment Banking Tutorials
- Investment Banking Basics
- What is Investment Banking? (Overview of what do they actually do!)
- Investment Banking Functions
- Investment Banking vs Commercial Banking
- Equity Research in an Investment Bank
- What is Asset Management Company AMC
- Sales and Trading in Investment Banking
- Private Placement, IPO and FPO in Investment Banking
- Investment Banking – Underwriters and Market Makers
- Investment Banking – Mergers and Acquisitions
- Investment Banking – Restructuring and Reorganisation
- Investment Banking Roles and Responsibilities
- Market Makers
- Propreitary Trading
- Deal Origination (Sourcing)
- Initial Public Offering (IPO)
- Price-Weighted Index
- Publicly Traded Companies
- Top 4 Must Know Investment Banking Charts (Free Download Template included)
- Pitch Book | Guide to Investment Banking Pitch Book (Examples)
- What is LBO?
- Leverage buyout Lbo Analysis
- LBO Financing
- Capital Budgeting
- Capital Budgeting Methods
- Capital Budgeting Examples
- Capital Budgeting Process
- Trading Floor
- Limit Order
- Block Trade
- Gray List
- Market Order vs Limit Order
- Bid vs Ask
- Bid vs Offer Price
- Industry vs Sector
- Merchant Bank
- Money Market Account
- Best Investment Banking Books
- Nasdaq vs Dow Jones
- Nasdaq vs Nyse
- Differences Between NSE and BSE
- SWOT Analysis
- SWOT Analysis Examples
- PEST Analysis Example
- Investment Banking Careers (24+)
- Investment Banking Firms (27+)
- Top Banks (42+)
- Mergers and Acquisitions (45+)
- Cryptocurrency Basics (10+)
NASDAQ vs Dow Jones
NASDAQ and Dow Jones have been used interchangeably but actually have different meanings.
- Dow refers to Dow Jones Industrial Average (DJIA) which is a crucial stock market index across the globe.
- NASDAQ, on the other hand, refers to National Association of Securities Dealers Automated Quotients Exchange which is an electronic exchange system.
NASDAQ vs Dow Jones Infographics
Here are the top 4 difference between NASDAQ and Dow Jones
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NASDAQ vs Dow Jones Key Differences
Below are some of the key difference between NASDAQ and Dow Jones in detail:
- NASDAQ is a stock market index of the US which contains around 3,000 companies whereas the DJIA comprises 30 major companies belonging to the industry leaders and major contributors to the industry and the stock market.
- NASDAQ primarily includes technology-based corporations such as Apple, Google and several other companies in their growth stages. DJIA is circulating around the earnings of the companies and they may be pulled off if the stock prices falter.
- NASDAQ is based on the value of the company’s outstanding stock i.e. on the market capitalization average of multiple companies on the index. Dow Jones is a price-weighted average index indicating that any type of stock split or adjustment is not considered in the average price computation. Thus, if one firm falters in the share price, the value of the entire index can deteriorate. For e.g. in 2008, the value of the AIG fell from $451 to $54 due to the financial crisis and the market, in turn, fell by 3,000 points.
- The rise and fall of the NASDAQ stock market depend on the largely on the performance of the technology sector but in case of DJIA, the performance is focussed on the 30 major companies as a group and not as individual stocks.
- NASDAQ stock market has 3 different market tiers namely:
- Capital market (Small cap) which is an equity market for companies with small levels of market capitalization and listing requirement is less stringent.
- Global Market (Midcap) consists of around 1,500 stocks representing Nasdaq global markets and have to meet strict financial and liquidity requirements. It’s also required to meet equivalent Corporate Governance Standards.
- Global Stock Market (Large Cap) is a market capitalization-weighted index made up of US-based and International stocks. It has met more stringent requirements in comparison to the mid-cap and is more exclusive compared to the others. The listing department periodically reviews the performance and the rules governing the stocks in this category.
On the other Hand Investment in DJIA, is Accessible Through:
- ETF (Exchange Trade funds) including Leverage or Short strategies. Due to improvements in pre-market trading, ETF’s offer a more accurate opening value for the average.
- Futures Contract: Dow futures are one of the most critical premarket tools and indicate how the DJIA will open.
- Options Contract
NASDAQ Quotes are Available at 3 Levels
- Level 1 which shows the highest bid and lowest ask
- Level 2 displays all public quotes of market makers and associated information of market dealers who are willing to buy or sell stock and recently executed orders
- Level 3 is used by market makers allowing them to enter their quotes and execute them
DJIA calculation is computed by taking the sum price of all 30 stocks and dividing them by the Dow Divisor. This divisor gets adjusted with respect to stock splits, spin-offs or other such similar structural changes for more accuracy.
NASDAQ vs DOW Head to Head Differences
Let’s look at the head to head difference between NASDAQ and Dow Jones –
|Basis of Comparison between NASDAQ vs Dow Jones||NASDAQ||Dow Jones|
|Meaning||Key index indicating stock market performance||Electronic marketplace where investors can buy/sell securities.|
|Index/Exchange||Both an index and exchange||Only an index of 30 major companies|
|Existence||New index invented in 1971 although its reserves its crown in electronic stock exchange.||Older index established in 1896 developed by Charles Dow|
|Abbreviation||National Association of Securities Dealers Automated Quotation||Dow Jones Industrial Average|
NASDAQ to Dow Jones Ratio
It is an interactive chart which shows the ratio of the NASDAQ Composite Index to the DJIA. A high ratio indicates the high level of bullishness since high momentum technology stocks can attract many more investor funds than traditional industrial firms as reflected in the DJIA. It is observed that if the stock market index of both Dow and Index are increasing positively in the same direction, it is an indication of the economy in a good health. The below is an example of the chart indicating the ratio of both the indexes. It clearly shows that during 1999-2000, the ratio was very high which was due to the dot-com bubble incident.
NASDAQ vs Dow Jones – Conclusion
One should note that though both NASDAQ and Dow refer to the market indices, it’s only the NASDAQ where investors can buy and sell stocks. Additionally, an investor can’t trade on the indexes as NASDAQ and DOW represent a mathematical average which people make use of for understanding the market. Investors can purchase index funds or ETF (exchange-traded funds).
This has a been a guide to the top differences between NASDAQ and Dow Jones. Here we also discuss the NASDAQ vs Dow Jones key differences with infographics, and comparison table. You may also have a look at the following articles –
- Differences Between Large Cap vs Small Cap
- Average vs Weighted Average – Top Differences Between
- Industry vs Sector – Similarities
- Differences Between Mutual Funds and Shares
- Differences Between Index Funds vs Mutual Funds
- Excel vs Google Sheet Differences
- Top Best Differences Bid and Ask
- NASDAQ vs NYSE
- Stock vs Mutual Funds
- Investment vs Savings
- Stock vs Real Estate Investment