"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?
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 ca; (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)