The Stock Market

Fundamental Concepts of American Capital Markets

Ticker symbol

Capital Markets in the US assign a ticker symbol to each firm that is listed on them. Trading in a company’s stock is conducted solely according to the ticker symbol. The symbol, which is composed exclusively of letters, usually resembles the name of the firm.

Ticker symbols on NASDAQ have 4 letters.

For example, Teva’s ticker symbol is TEVA.

Ticker symbols on the NYSE have between one and three letters. Ford’s symbol is F. Using a company’s full name or an incorrect symbol can cause a transaction to be conducted in the wrong stock.

Fundamental Concepts

Indices

The Dow Jones Industrial Average (DJIA) is composed of the thirty largest listed companies in the US. The firms represent a variety of sectors.

The index’s value is calculated as a mathematical average of the share prices of those firms regardless of their market capitalization. The higher that a firm’s share price rises, then the greater its effect on the index.

The NASDAQ Composite Index includes all stocks listed on NASDAQ. The weight of a stock in the index is determined by the firm’s market cap. The larger a company, the more that the change in its share price affects the index. The majority of companies listed on NASDAQ are high-tech companies.

The S&P 500 lists the five hundred largest companies in the United States. As is the case with NASDAQ, a company’s market cap determines the weight of its stock in the index. This index is considered to be representative of the American economy as a whole.

Fundamental Concepts of American Capital Markets596Fundamental Concepts of American Capital Markets