Which of the following indexes most accurately reflects changes in the value of the overall U.S....

Which of the following indexes most accurately reflects changes in the value of the overall U.S. equity market?

-Dow Jones Industrial Average

-S&P 500

-NASDAQ Composite Index

-NASDAQ Technology Index

Expert Solution

Let us first discuss these indexes one by one.

Dow Jones Industrial Average : Dow Jones Industrial Average (DJIA) is an index in US market which measures the performance of thrity large companies which are listed on stock exchange in United States.

S&P500 : S&P500 is also an index in US market that measures performance of 500 large companies which are listed on stock exchange in United States.

NASDAQ Composite Index: NASDAQ composite indes measures the performance of all companies which are listed on NASDAQ stock exchange. It is the second largest exchange in U.S.

NASDAQ technology index: NASDAQ technology index measures the performance of 100 top technology companies listed on NASDAQ in United Stock.

If we go by definition written above, Dow Jones covers only top 50 companies hence measuring overall equity market of U.S. considering top 50 companies is not logical and correct. Like, NASDAQ composite index covers almost all companies right from hight net worth (blue chip) to averagee perfoming companies. This calculation may dilute the prospective investor from guaranteed investment to risky investment. The average index in this category may not be the worth to consider as number of low performing companies may affect the index and the investor may be misguided. Likewise, the few top companies will affect the major part of the performance and the result may not be so reliable to take. NASDAQ technology is best for measuring technology companies like Apple, Microsoft, Intel etc and other part of the economy can not be measured.

Hence, the only best indicator of U.S. economy is the S&P500 which measure the perfomance of top 500 companies from all sectors and will reflects the most accurate changes in value of overall US equtiy market.

jeff jeffy answered 1 year ago

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