Definition
The NASDAQ Global Select Market Composite is a market capitalization-weighted index that consists of over 1,400 stocks, both U.S.-based and international, which meet the NASDAQ’s stringent financial and liquidity requirements, as well as corporate governance standards. This index reflects the performance of stocks listed on the NASDAQ Global Select Market, which is one of the three tiers of the NASDAQ exchange, known for its high standards and exclusivity.
NASDAQ vs Other Markets Comparison
| Feature | NASDAQ Global Select Market | NASDAQ Global Market | NASDAQ Capital Market |
|---|---|---|---|
| Exclusivity | High | Moderate | Low |
| Financial Requirements | Stringent | Moderate | Lenient |
| Market Capitalization Levels | High | Moderate | Low |
| Number of Stocks | About 1,400 | Numerous | Varies |
| Governance Standards | Stringent | Moderate | Lenient |
Examples
- Market Capitalization: If a company has a market cap of $10 billion and its stock represents 1% of the total market cap of the index, the stock influences the index with a weight of 0.01%.
- Liquidity Requirements: A stock must consistently outperform other listings in trading volume.
Related Terms with Definitions
- Market Capitalization: The total value of a company’s outstanding shares, calculated by multiplying the current share price by the total number of shares.
- Liquidity: The ability to quickly buy or sell an asset without causing a significant change in its price.
- Index: A statistical measure that reflects the composite value of a selected group of assets.
Visualization
graph TD;
A[NASDAQ Global Select Market]-->B[Market Capitalization Weighted Index]
A-->C[Consists of 1400+ Stocks]
B-->D[Reflects Performance]
C-->E[Stricter Standards]
F[Global Market Select] -->G[Moderate Standards]
F-->H[Lower Market Caps]
Humorous Insights
- “Investing in stocks is like dating: the more exclusive you are, the more you think you’re the best catch!” 🐟
- Did you know? The tickers for stocks in the NASDAQ Global Select Market often spark more joy than a toddler with a new toy! 🎉
Frequently Asked Questions
Q1: How often are the stocks in the NASDAQ Global Select Market Composite reviewed?
A1: The stocks are typically reviewed every October to assess their eligibility.
Q2: Can a company lose its status in the Global Select Market?
A2: Yes, if a company falls below the required standards, it can be downgraded to a different tier.
Q3: What are the main advantages of investing in the Global Select Market?
A3: Investors benefit from higher company quality, better financial health, and stricter governance.
References to Online Resources
Suggested Books for Further Studies
- Common Stocks and Uncommon Profits by Philip A. Fisher
- A Random Walk Down Wall Street by Burton Malkiel
Test Your Knowledge: NASDAQ Global Select Market Quiz
## What is the primary characteristic of stocks in the NASDAQ Global Select Market?
- [x] Stringent financial and liquidity requirements
- [ ] Low trading volumes
- [ ] Relaxed corporate governance standards
- [ ] No financial requirements
> **Explanation:** Stocks in this market must meet stringent financial and liquidity requirements to ensure high quality.
## How many stocks are typically listed in the NASDAQ Global Select Market Composite?
- [ ] Less than 500
- [x] About 1,400
- [ ] Over 2,000
- [ ] Exactly 1,000
> **Explanation:** As of August 2020, the NASDAQ Global Select Market Composite consisted of approximately 1,400 stocks.
## Which market has the most stringent requirements among the NASDAQ tiers?
- [ ] NASDAQ Global Market
- [x] NASDAQ Global Select Market
- [ ] NASDAQ Capital Market
- [ ] All markets have the same standards
> **Explanation:** The NASDAQ Global Select Market is known for its stringent financial and governance standards.
## What does “market capitalization-weighted” mean?
- [ ] All stocks have equal weight regardless of size
- [ ] Larger companies have a more significant influence on the index
- [x] The index reflects the size of companies proportionately
- [ ] Only small companies influence the index
> **Explanation:** In a market capitalization-weighted index, larger companies (by market cap) have a greater impact on the index's performance.
## How often does the NASDAQ review the Global Market Composite for eligibility?
- [x] Annually
- [ ] Monthly
- [ ] Every five years
- [ ] Biannually
> **Explanation:** The review of the Global Market Composite for listing eligibility on the Global Select Market occurs annually, typically in October.
## If a stock fails to meet the NASDAQ Global Select Market requirements, what happens?
- [x] It may be downgraded to a lower tier
- [ ] It remains untouched
- [ ] It automatically goes private
- [ ] It gets a trophy for trying
> **Explanation:** Stocks that fail to meet requirements may be downgraded, ensuring only the fittest stocks remain.
## True or False: The NASDAQ Global Capital Market has stricter requirements than the Global Select Market.
- [x] False
- [ ] True
> **Explanation:** The Global Capital Market has lenient qualifications compared to the Global Select Market.
## A company with a higher market cap relative to others will have what effect on the NASDAQ index?
- [ ] Less influence
- [x] More influence
- [ ] No influence
- [ ] Negative influence
> **Explanation:** A company with a higher market cap will exert more influence on the index's movements.
## What is an advantage of being listed on the NASDAQ Global Select Market?
- [ ] Less visibility
- [x] Higher investor confidence due to stringent requirements
- [ ] Insurance against stock price drops
- [ ] Guaranteed returns on investment
> **Explanation:** Companies listed here typically have more credibility, leading to increased investor confidence.
## What does it mean for a stock to meet "corporate governance standards"?
- [ ] The company can choose how it runs its office parties
- [x] The company adheres to ethical practices and transparency
- [ ] There are no standards required
- [ ] The company must have a pet policy
> **Explanation:** Meeting corporate governance standards involves ethical practices and transparency to protect shareholder interests.
Thank you for reading! Remember, with great market knowledge comes great investment power! Happy trading! 🤑
