Fundamental Concepts of American Capital Markets
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.
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.