Question

At 11:03 AM on July 16, 2020, the S&P 500 Index was down 0.71%, the Dow Jones Industrial Average was down 0.56% and the NASDAQ Composite Index was down 1.24%. Are any of these more accurate indicators of the day’s “market return” than the others? If so, why? If you followed the market regularly, to which index would you give the most credence and why?

I dont need a super long description. Just to the point!

Answer 1

S&P500 index is made up of largest 500 companies according to the free float capitalization weighting method. According to this method, index is formed with the help of free float market capitalization method means both number of shares and price matters here.

Dow Jones Industrial average is made up of largest 30 companies according to the price weighted method. Price weighted method means the index is formed with the help of the prices of the stock only. So, it gives weightage to the price of stocks only.

NASDAQ composite includes approximately all listed companies on NASDAQ stock market. So, it is a broader index.

So, answering your question, none of the index can give us the 100% right answer of market return but the more broader a index is, the more accurate it is.

So, NASDAQ will give the true picture of the market as this is the broadest index.