Nasdaq To Launch Risk-Weighted Nasdaq 100

May 14, 2013

The newest addition to Nasdaq’s family of indexes is a risk-weighted version of the Nasdaq 100.

Nasdaq OMX, the company behind the No. 2 U.S. stock exchange and a big and growing indexing business, plans later this month to launch a risk-weighted version of its popular Nasdaq-100 Index, which is the basis for the nearly-$35 billion PowerShares QQQ Trust (NasdaqGM: QQQ).

The company’s email communique about the May 23 launch was light on details, but did say that the Nasdaq-100 Indexcellent 80 Index will hedge risk by reducing participation in the Nasdaq-100 when the index loses value. It noted that it will make use of the patent-pending methodology of Indexcellent, LLC to “apply protection for 80 percent of the high water index level.”

This launch comes less than a month after S&P Dow Jones Indices announced the S&P GSCI Risk Weight Index. The launches speak to a broader focus in the world of indexes and ETFs on enhanced beta-type screens that attempt to protect returns or deliver better returns than first-generation capitalization-weighted indexes.

The Nasdaq-100 comprises the 100 largest (by market-cap), nonfinancial securities from the Nasdaq exchange, and the Nasdaq-100 Indexcellent 80 Index will invoke the index provider’s patent-pending “Indexcellent” methodology to create exposure to the Nasdaq-100 stocks while hedging against volatility.

 

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