NASDAQ stands for National Association of Securities Dealers Automated Quotation System. The NASDAQ-100 Index is a modified market capitalization weighted index and was launched in 1971 with a starting value of 100. The security types eligible for the Index include common stocks, ordinary shares, and ADRs. To be eligible for initial inclusion in the Index a security must have an average daily trading volume of at least 200,000 shares and be listed exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market for at least three full months excluding the first month of initial listing.
Index composition is reviewed on an annual basis in December except under extraordinary circumstances that may result in an interim evaluation. Securities that meet the applicable eligibility criteria are ranked by market value. Index-eligible securities which are already in the Index and which are ranked in the top 100 eligible securities (based on market capitalization) are retained in the Index.
An Index Security that is ranked 101 to 125 is also retained, provided that such security was ranked in the top 100 eligible securities as of the previous Ranking Review or was added to the Index subsequent to the previous Ranking Review. Index Securities not meeting such criteria are replaced. The replacement securities chosen are those Index-eligible securities not currently in the Index that have the largest market capitalization. If at any time during the year other than at the review, an Index Security no longer meets the criteria or is otherwise determined to have become ineligible, it is replaced.
The Index is rebalanced on a quarterly basis with changes to the shares becoming effective after the close of trading on the third Friday in March, June, September and December. Three versions of the Index are calculated. The price return version of the Index is ordinarily calculated without regard to cash dividends on Index Securities.
The total return index version reinvests cash dividends on the ex-date. The notional net total return version is designed to reflect a net total return index reinvesting 70% of cash dividends, and factors in a deduction based on an indicative 30% tax rate. All Indices reflect extraordinary cash distributions.
Technology comprises 52.52% followed by Consumer Services at 23.96%, Healthcare at 14.8%, Consumer Goods at 4.62%, Industrials at 3%, Telecommunications at 0.78% and Basic Materials at 0.33%.
The NASDAQ has given a return of 4.14% on a year on year basis and has remained flat year to date. The index had reached an all-time high of 5232 in July 2015. The index has a Price to Earnings ratio of 22.35 in the current scenario. Apple Incorporation company has the highest weightage of 14.26% in the NASDAQ index followed by Microsoft with a weightage of 7.14%, Amazon with 3.98%, Facebook with 3.84%, Google with 3.55% and Gilead Sciences with 3.37% while others have less than 3.3% weightage each in the index.