Nasdaq Composite Index Methodology
1. Launched On: In 1971, on 5th February, the Nasdaq Composite Index was launched.
2. Calculation: Market capitalization weighing methodology is used to value the index. It is calculated by adding the market capitalization of the stocks on the basis of the current market price of the securities. This result is then adjusted using a constant index divisor. The initial value was set at 100.
3. Timings: The Nasdaq Composite Index is continuously calculated throughout the trading day and its value is circulated every second from 9:30 am till 5:16 pm ET (Eastern Time Zone). The closing value might change due to the changes in the last reported price for index constituents till 5:15 pm ET.
4. Versions: Two versions are calculated- Price Return Index and Total Return Index. The total return index assumes that the listed companies distribute their cash dividends into reinvestment.
5. Changes in the Prices: Due to stock splits, stock dividends or spinoffs, the share price of the companies changes which are tallied on after the announcement of the action. There are changes in the total shares outstanding, due to conversions, secondary offerings, stock repurchases or acquisitions, that are reflected on the night before the effective dates of these occurrings.
6. Eligibility Requirements: The requirements for inclusion on the index are reviewed throughout the year. If a stock or security does not meet the eligibility requirements, they are removed at any given time generally at its latest selling price.