From Wikipedia, the free encyclopedia - View original article
The NASDAQ-100 is a stock market index made up of 102 stocks issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It is based on exchange, and it is not an index of U.S.-based companies. It does not have any financial companies, since these were put in a separate index. Both of those criteria differentiate it from the Dow Jones Industrial Average, and the exclusion of financial companies distinguishes it from the S&P 500.
The NASDAQ-100 began on January 31, 1985 by the NASDAQ, trying to promote itself in the shadow of the New York Stock Exchange. It did so by creating two separate indices: this index, which consists of Industrial, Technology, Retail, Telecommunication, Biotechnology, Health Care, Transportation, Media and Service companies, and the NASDAQ Financial-100, which consists of banking companies, insurance firms, brokerage houses and mortgage companies. By creating these two indices, the NASDAQ hoped that options and futures contracts would be created on them, and mutual funds would adopt them as their benchmarks.
The base price of the index was initially set at 250, but when it closed near 800 on December 31, 1993, the base was reset at 125 the following trading day, leaving the halved NASDAQ-100 price below that of the more commonly known NASDAQ Composite. The first annual adjustments were made in 1993 in advance of options on the index that would trade at the Chicago Board Options Exchange in 1994. Foreign companies were first admitted to the index in January 1998, but had higher standards to meet before they could be added. Those standards were relaxed in 2002, while standards for domestic firms were raised, ensuring that all companies met the same standards. The all-time highs for the index, set at the height of the Dot-Com Bubble in 2000, stand above the 4,700 level, while its recent bear market lows in 2002 revolving around the Early 2000s Recession, the September 11, 2001 Attacks and the subsequent Afghan War occurred below the 900 point level.
After a gradual 5-year recovery to an intraday high of 2,239.51 on October 31, 2007, the highest reached since February 16, 2001, the index corrected below the 2,000 level in early 2008 amid the Late-2000s Recession, the United States Housing Bubble and the Global Financial Crisis of 2008. Panic focusing on the failure of the investment banking industry culminated in a loss of more than 10% on September 29, 2008, subsequently plunging the index firmly into bear market territory. The NASDAQ-100, with much of the broader market, experienced a Limit Down open on October 24 and reached a 6-year intraday low of 1,018 on November 20, 2008.
Amid quantitative easing (QE) from the Federal Reserve and optimism that the financial crisis was ending, the index embarked on a volatile four-year climb higher, closing above 3,000 on May 15, 2013 for the first time since November 15, 2000. By October 18, 2013, with GOOG passing $1,000 per share for the first time, the index had made a closing high of 3,353.88 and intraday high of 3,355.63, its highest levels since the United States elections, 2000 and more than triple the 2008 low.
The NASDAQ-100 is often abbreviated as NDX in the derivatives markets. Its corresponding futures contracts are traded on the Chicago Mercantile Exchange. The regular futures are denoted by the Reuters Instrument Code ND, and the smaller E-mini version uses the code NQ. Both are among the most heavily traded futures at the exchange.
The PowerShares QQQ exchange-traded fund, sponsored and overseen since March 21, 2007 by Invesco through PowerShares, trades under the ticker NASDAQ: QQQ. It is commonly referred to by its ticker or nickname, the "cubes". It was formerly called NASDAQ-100 Trust Series 1. On December 1, 2004, it was moved from the American Stock Exchange where it had the symbol QQQ to the NASDAQ and given the new four letter code QQQQ, sometimes called the "quad Qs" by traders. On March 23, 2011, Nasdaq changed its symbol back to QQQ.
In 2000, it was the most actively traded security in the United States, and hit an all-time split adjusted intra-day trading high of $120.50 on March 24 of that year, but has since dropped to being within the top five after other stocks and ETFs such as the Standard & Poor's Depositary Receipts. As of August 2012, the fund is the third most actively traded exchange-traded product in the world. On July 17, 2007, the ETF closed above $50 for the first time since early 2001. After reaching a peak of $55.07 on October 31, 2007, the Qs succumbed to a wider financial crisis along with a decline in technology spending and plunged towards a November 21, 2008 intra-day low of $25.05. Since then, it gradually advanced to surpass its 2007 peak, despite some volatility. By October 18, 2013, it had passed and closed above $82 to reach its highest price levels since November 6-7, 2000 and highest value since September 29, 2000 when adjusted for splits and dividends.
ProShares issued by ProFunds offer other related NASDAQ-100 ETFs such as the 2x NYSE Arca: QLD, which attempts to match the daily performance of the NASDAQ-100 by 200% and the Inverse 2x NYSE Arca: QID, which attempts to match the inverse daily performance by 200%. For replicating 3x performance; there is the NASDAQ: TQQQ and for Inverse 3x, NASDAQ: SQQQ. ProFunds also issues Inverse Performance NYSE Arca: PSQ for a bearish strategy on the index.
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:
Additionally, companies with multiple classes of stock are only allowed to have one class included in the index (usually the largest class in terms of market capitalization).
While the composition of the NASDAQ-100 changes in the case of delisting (such as transferring to another exchange, merging with another company, or declaring bankruptcy, and in a few cases, being delisted by NASDAQ for failing to meet listing requirements), the index is only rebalanced once a year, in December, when NASDAQ reviews its components, compares them with those not in the index, re-ranks all eligible companies and makes the appropriate adjustments.
There are two tools the NASDAQ uses to determine the market values of companies for the annual review:
Those components that are in the top 100 of all eligible companies at the annual review are retained in the index. Those ranked 101 to 125 are retained only if they were in the top 100 of the previous year's annual review. If they fail to move into the top 100 in the following year's review, they are dropped. Those not ranked in the top 125, are dropped regardless of the previous year's rank.
A company will also be dropped if, at the end of two consecutive months, the component fails to have an index weighting of at least one-tenth of a percent. This can occur at any time.
The companies that are dropped are replaced by those who have the largest market value and are not in the index already. Anticipation of these changes can lead to changes in the stock prices of the affected companies.
All changes, regardless of when they occur, are publicly announced via press releases at least five business days before the change is scheduled to take place. The 2012 results of the re-ranking and rebalancing will be announced on December 14 with the changes effective the morning of December 24, coinciding with the expiration of options on December 21.
The NASDAQ-100 is frequently confused with the Nasdaq Composite Index; the latter index (often referred to simply as "The Nasdaq") includes the stock of every company that is listed on NASDAQ (more than 3,000 altogether) and is quoted more frequently than the NASDAQ-100 in popular media.
The NASDAQ-100 is a modified capitalization-weighted index. This particular methodology was created in 1998 in advance of the creation the NASDAQ-100 Index Trust, which holds portions of all NASDAQ-100 firms. The new methodology allowed NASDAQ to reduce the influence of the largest companies and to allow for more diversification. However, the weights of the stocks were not changed after that, which led to more problems. In May 2011, NASDAQ did a major rebalance of the index to bring it closer to market-cap weighting.
The only time the index is to be rebalanced again is if:
In addition to its lack of financial companies, the Nasdaq-100 includes 8 companies incorporated outside the United States. Although the S&P 500 Index includes non-U.S. companies, the Dow Jones Industrial Average has never included foreign companies.
As of December 2013, the Nasdaq-100 has companies incorporated in the following foreign countries:
Additionally, the NASDAQ-100 is also the only index of the three that has a regularly scheduled re-ranking of its index each year (in December), ensuring that the largest non-financial companies on NASDAQ are accurately included.
In 2006, NASDAQ created a "farm team" index, the NASDAQ Q-50, representing the next fifty stocks in line to enter the NASDAQ-100. With some exceptions, most stocks that are added to the index come up through the Q-50. In 2011, NASDAQ created the NASDAQ-500 to track the 500 largest stocks on NASDAQ, and the NASDAQ-400, tracking those stocks not included in the NASDAQ-100.
NASDAQ has also divided the 100 into two distinct sub-indices; the NASDAQ-100 Tech follows those components who service the tech sector, and the NASDAQ-100 Ex-Tech, which follows those components that are not considered tech companies. The latter index includes noted E-commerce companies Amazon.com and eBay, which are classified as retailers.
This list is current as prior to the market open on August 4, 2014. An up-to-date list is available in the External links section. It should be noted that this is an alphabetical list, and not a ranked list.
On December 22, 2008, NASDAQ added the following companies to the NASDAQ-100 index prior to the market open: Automatic Data Processing, First Solar, Life Technologies, Ross Stores Inc., Maxim Integrated Products, Illumina, Inc., Pharmaceutical Product Development, O'Reilly Automotive, Urban Outfitters, J. B. Hunt Transport Services, and Warner Chilcott. The companies that were replaced are: Amylin Pharmaceuticals, Cadence Design Systems, Discovery Communications, Lamar Advertising Company, Leap Wireless International, Level 3 Communications, PetSmart, SanDisk, Sirius XM Radio, Virgin Media, and Whole Foods Market.
On December 21, 2009, seven stocks joined the NASDAQ-100 index before the market open: Vodafone, Mattel, BMC Software, Mylan, Qiagen, SanDisk and Virgin Media. These stocks replaced Akamai Technologies, Hansen Natural, IAC/InterActiveCorp, Liberty Global, Pharmaceutical Product Development, Ryanair and Steel Dynamics.
On December 20, 2010, seven companies were added to the NASDAQ-100 index prior to the market open: F5 Networks, Akamai Technologies, Netflix, Micron Technology, Whole Foods Market, Ctrip.com International and Dollar Tree. They replaced Cintas, Dish Network, Foster Wheeler. Hologic, J. B. Hunt, Logitech and Patterson Companies. These were the only changes made to the index that year and the fewest since 1997.
On May 6, 2011, WFMI (Whole Foods Market) changed its ticker symbol to WFM prior to the market open.
On December 6, 2011 Perrigo (PRGO) joined the index. The company replaced Joy Global (JOYG), who transferred their stock listing to the NYSE. Perrigo had been a member of the index in the 1990s, being dropped in 1996.
On December 19, 2011 five companies joined the NASDAQ-100 index prior to the market open as a result of NASDAQ's annual reranking of the index. They are Avago Technologies (AVGO), Fossil, Inc. (FOSL), Monster Beverage (MNST, formerly known as Hansen Natural, ticker symbol HANS), Nuance Communications (NUAN), and Randgold Resources (GOLD). These companies replaced FLIR Systems (FLIR), Illumina (ILMN), NII Holdings (NIHD), Qiagen (QGEN), and Urban Outfitters (URBN).
On January 9, 2012, HANS changed its ticker symbol to MNST (Monster Beverage) prior to the market open.
On July 23, 2012, Kraft Foods, Inc. (KFT), now known as Mondelez (MDLZ), became a component of the index prior to the market open, replacing Ctrip (CTRP). Kraft Foods was the fourth component of the NASDAQ-100 to also be included in the Dow Jones Industrial Average, joining Cisco Systems, Intel, and Microsoft, but was removed from the DJIA when it subsequently split into two companies.
Prior to the market open on Monday, December 24, 2012, 20 changes to the index took place. The ten companies joining the index are:
The ten companies being dropped are:
Prior to the market open on Monday, December 23, 2013, 10 changes to the index took place. The five companies joining the index are:
The five companies being dropped are:
Prior to the market open on Thursday, April 3, 2014, the Class C common Stock of Google, Inc. was added to the index as a result of Google's stock split. This meant the index had 101 components.
Later in 2014 the C stock of Liberty Media was added to the index, meaning that the index then had 102 components.