The Nasdaq-100 was initially rebalanced in 1998 so the benchmark would meet diversification rules for investment products such as ETFs.
However, over time and market cycles, the adjustment factors determined in 1998 “in order to reduce the weights of the top index securities, have created a scenario where index weights are no longer in alignment with actual market capitalization weights,” Nasdaq said in a presentation.
The special rebalance will be enacted based on index stocks and shares outstanding at the end of March.
Nasdaq said it has conducted research to determine the historical impact if the Nasdaq-100 had not been adjusted in 1998. The hypothetical market-cap-weighted version regains an “extremely high” correlation of 99.3% to the Nasdaq-100 after the original index rebalance, it says.