The Nasdaq 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange.
How is this calculated and decided on?
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From Wikipedia, the index consists of the 100 "largest" companies (by market capitalization) that meet certain requirements.
The requirements for being eligible for the index are:
The NASDAQ has over the years put in place a series of stringent standards that companies must meet before being included in the index. Those standards include the following:
- Being listed exclusively on NASDAQ in either the Global Select or Global Market tiers.
- Being publicly offered on an established American market for three months.
- Having average daily volume of 200,000 shares.
- Being current in regards to quarterly and annual reports.
- Not being in bankruptcy proceedings.
and the calculation of "size" is market cap (share price * number of shares outstanding), using the following values:
There are two tools the NASDAQ uses to determine the market values of companies for the annual review:
- Share Prices as of the last trading day in October.
- Publicly announced share totals as of the last trading day of November.
Note that if a company falls out of the top 100, it does not necessarily get removed from the index immediately (see the Yearly rebalancing and re-ranking section)