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To: uu who wrote (8111)	12/3/1997 9:00:00 AM
From: Liatris Spicata	Read Replies (1) \| Respond to of 25814

Addi- Well the NASDAQ index is weighted toward the larger capitalization stocks- Microsoft and Intel contribute signficantly to the index, but I can't tell you how it's calculated. But I think there are other components of the index that have not suffered signficantly- PMTC comes to mind. Larry

To: uu who wrote (8111)	12/3/1997 9:21:00 AM
From: shane forbes	Read Replies (2) \| Respond to of 25814

Addi, I'll give it a shot. NASDAQ is a market-value weighted index. So assuming that there are only two stocks in the index: On 1/1/196X - the date the index started: Stock A valued at $100 (outstanding shares 10) - large cap Stock B valued at $100 (outstanding shares 01) - small cap The capitalizations are: Stock A - $1,000 Stock B - $ 100 Total - $1,100 The value of the index is some number representing this value so for simplicity assume that on 1/1/1980 this NASDAQ composite's value is 100 (your starting value can be anything you want). Now fast forward to 1/1/1998: Stock A valued at 1 (still shares outstanding = 10) - large cap fall Stock B valued at 100 (outstanding shares = 1) - small caps flat Total cap - 110 + 1001 = $110 Now the value of the NASDAQ index is 10. (100/$1,100 * $110 = 10) --- So the large cap went down 99%, the small cap went down 0%, and the index went down 90%. Conversely you can see that if the small cap declined 99% and the large cap was flat, the index would have fallen only 9%. --- Hence the effect of the large caps is magnified. If CSCO,INTC,MSFT, ORCL,AMAT,AMGN and a few others are so far ahead in terms of market cap relative to the other stocks in the index basically what you've got is a tech index. It does not matter if you have 500 financial services firms, 300 water purifier firms,etc as long as their total cap relative to the big boys is minute. You can therefore exclude all the little caps (upto some degree of approximation) and still get a value of the index that's pretty accurate by including only the top tier stocks - which happen to be all tech stocks. To give you an idea of the dominance of the large caps check out the NASDAQ 100 where MSFT is responsible for a fifth of the value of that index, INTC is responsible for 15% of the value of that index! So two stocks represent a third of that index!!! With the NASDAQ composite the %ge will be lower because all the smaller caps will be included but still it shows the dominance of these 2 companies. The bigger they get the more important their value in the index. --- re: why the index is not lower. My guess is that the stocks peaked at different times therefore the index would have smoothed the effect of the prectipitous falls. Also MSFT has not fallen and CSCO has not fallen. They are responsible for probably somewhere around 10-20% of the composite (total guesswork).

To: uu who wrote (8111)	12/3/1997 10:55:00 AM
From: getgo234	Respond to of 25814

Addi: Regarding the NASDAQ a couple of generic thoughts. A significant portion of the NASDAQ stocks are financial stocks which have done very well this year (wish I owned some). Recently I read that 30% of the S & P 500 ( I know you are talking about the NASDAQ ) is made up of energy related stocks. In summary I have the same feeling as you regarding the NASDAQ as my portfolio of techs is being crushed while the NASDAQ is not significantly below its highs. Unfortunately my portfolio is more closely tied to the SOX index which is currently at 280 down from its high of 405 ( approximately 31%).

To: uu who wrote (8111)	12/3/1997 10:36:00 PM
From: Duane L. Olson	Respond to of 25814

Addi, O SLB , Your observation is accurate. The Nasdaq composite index is certainly not representative of the entire nasdaq, being highly affected by the big cap listings, such as Msft and INTC. The Russell 2000 gives a much better representation of the market, and the Wilshire even better.. Perhaps someone could point to a site that will list the components of the Nasdaq.. TSO Your other observation -- that the high tech stocks are really getting beaten is also all too clear. It has been a bad time to hold tech stocks. We are just starting to get the famous "Blood in the Streets" -- supposedly the best time to start buying tech stocks. They sure are starting to look like bargains to me!! But so far, anything I have bought lately has proved to be a case of "catching a falling sword" -- my purchases are under water. My next buys will be closer to my original time target -- mid-December, when I am forecasting the bottom of the current carnage. Good luck, Addi!!! TSO