What is the NYSE Composite Index
The NYSE Composite Index is an index that measures the performance of all stocks listed on the New York Stock Exchange. The NYSE Composite index includes more than 1,900 stocks, more than 1,500 of which are American companies. Its size therefore makes it a much better indicator of market performance than narrow indices which have far fewer components. The weights of the components of the index are calculated on the basis of their floating market capitalization. The index itself is calculated on the basis of price return and total return, which includes dividends.
BREAKING DOWN NYSE Composite Index
The NYSE Composite Index includes all stocks listed on NYSE, including foreign stocks, US certificates of deposit, real estate investment trusts and tracking stocks. The index excludes closed-end funds, ETFs, limited partnerships and derivatives.
The two main advantages for investors of the NYSE composite index are (a) its quality, since all its constituents must meet the strict listing requirements of the stock exchange, and (b) its global diversification, with non-US companies representing more than a third of the market capitalization. Foreign companies listed on the NYSE are headquartered in 38 different countries, with the largest number of foreign issuers from Canada, China, the United Kingdom, Japan and Mexico.
Operation and maintenance of the NYSE composite index
According to the New York Stock Exchange, its composite index was first established in 1966. It was reintroduced in 2003 using a new methodology that is more in line with the index methodology applied by widely used American indices.
Currently, the NYSE Composite Index is calculated and maintained by the Dow Jones Indices. Previously, the composite index was calculated by Securities Industry Automation Corp.
According to the current methodology, the composite index no longer takes into account a variety of categories of securities eligible for inclusion: closed-end funds, ETFs, preferred shares, derivatives, beneficiary interest shares, trust units and limited partnerships.
The last trading price of the securities included is applied to calculate the composite index. Maintenance includes regular monitoring and adjustments made to companies added to or removed from the index as well as other actions, including stock splitting, corporate restructuring and spinoffs.
Certain corporate shares, such as stock splits and stock dividends, may require simple changes to the composite index to reflect the outstanding common shares as well as the stock prices of the included companies.
An adjustment to the index divider may be necessary for other types of activity, including the issuance of shares, which would cause changes in the float-adjusted aggregate market capitalization of the composite index.