Here's the NASDAQ answer.... Calculated as often as possible for over 3000+ stocks... started with a base value of 100.0 sometime in the early 70s... this index is a "cap-weighted" index... -------- I've never had the privilege of seeing the actual formula but the calc should go something like this... [ (All Stock prices) * (Respective shares out) ] = Aggregate Market Cap Aggregate Market Cap / Some Indexing Factor = Adjusted value ( New NASDAQ Adjusted Value / Previous NASDAQ Adjusted Value ) * Previous NASDAQ Adjusted Value = Latest NASDAQ quote To the best of my knowledge: * Dividends do not directly effect this value. * Indexing factor is there only to reduce the Aggregate market cap number to something more manageable... (reading a number in the thousands is much faster than reading one in the trillions) * Splits do not affect this index * When a company is delisted, the index shrinks in value (all things equal) ... When a company is added, the index increases in value. ..... Anybody have any corrections or additions? Anyone know the actual formula?

The Dow and NASDAQ indices are calculated in different ways. The Dow is what is known as a “price weighted” index & the NASDAQ is a “market capitalization weighted” index. When people talk about the Dow Jones index, or the Dow, they are referring to the Dow Jones Industrial Average (DJIA). The DJIA is comprised of 30 of the biggest companies on the market. The Dow occasionally will drop and pick up different companies -- but it doesn't happen very often. (The last change to the list was in 2002 or 2003 when Eastman Kodak, Allied-Signal, and Int’l Paper were dropped & Pfizer, Verizon, and AIG were added.) The DJIA is calculated by adding the current stock prices of these companies & then dividing the average by a divisor. Initially, the divisor was simply the number of companies in the index – thus providing a simple average of the stock prices. The divisor has been modified over the years for the following reason: The DJIA is “price weighted.” It does not look at the relative values of the companies in the stock market, only the stock price. It doesn’t matter if the company has a large number of shares or a small number – only the price of the stock, not the overall value of the company is tracked. This is a different method than used by the NASDAQ index or the S&P 500 index, which are “market capitalization weighted”. So, for example, if a company on the DJIA decides to do a 2-for-1 stock split, then the stock price is cut in half and the number of shares is doubled. Since the DJIA is an average of the share price, a stock split (or a corporate spin off or a company going off the DJIA or a host of other things) artificially adjusts the index. The company is not doing worse because of the stock split, even though the share price of the company has decreased. The method for adjusting the divisor requires that you look at the DJIA for the day before the change. Then, you ask yourself, if the stock split occurred on this day, what would the divisor have to be in order to maintain the accurate DJIA for the day? You can set up a simple algebraic equation & get the new divisor. Then the divisor is applied not to the day before the change, but rather to the day of the change and thereafter. The current DJIA divisor is about 0.839 & can be found from a host of sources online or in newsprint. The NASDAQ Composite Index & the S&P 500 Index are both “market capitalization weighted” indices. Rather than looking at the average of the stock prices, they track the number of shares multiplied by the stock price. Therefore, if for example a company has a 2-for-1 stock split, thereby cutting the stock price in half and doubling the number of shares, these market cap weighted indices do not need to recalibrate. The only significant reason that the divisors (or "bases") of these indices are adjusted is when a company leaves or comes on to the list. The NASDAQ Composite Index tracks all of the companies traded on the NASDAQ stock exchange (just under 3,300 companies). The S&P 500 Index, as the name suggests, tracks 500 of the largest companies – about 70% of the U.S. market – most of which are listed on the New York Stock Exchange (NYSE), but a growing number are listed on the NASDAQ exchange. Under a market cap weighted index, the stock prices of large companies have a greater impact than smaller companies. This makes perfectly good sense to me – I believe the Dow and other price weighted index only make sense in a pre-computer age. Nevertheless, the DJIA statistically has been a very good measure of the market & provides a wealth of historical information on the market that is not necessarily recorded elsewhere. There are many other indices that track other groups of stocks – many of them focused on a particular industry group or company characteristic. Most of them are market cap weighted.