Global equity indexes, Financial Management

Global Equity Indexes:

As described earlier in this chapter, there are several stock market indexes available which depict the performance of particular sectors and a country as a whole. However, the problem arises when the performance of one country index is compared with that of another, since the composition of securities, sectors, and selection and calculation methodologies are most times different in each country. To overcome this problem of comparison, several groups of global non-banking financial institutions, index service providers and international exchanges have formed major regional and global indices which track the performance of concerned region or global equity market as a whole. The three most commonly used global indices are: the Morgan Stanley Capital International (MSCI) World Index, the Financial Times Stock Exchange (FTSE) All World Index, and the Dow Jones Global Index (DJGI).

Construction Methodology

All three indices' constituent weights are determined by market capitalization, i.e., market price multiplied by shares outstanding, with an adjustment for the proportion of shares which are not freely available to the investors. Country inclusion criteria are all similarly based on the size of the equity market, the freedom of capital movement, and the ability to repatriate dividends. As a result, the countries included in each index are the same, for the most part, although there are a few notable differences.

MSCI Index

The MSCI World Index is a free float adjusted market capitalization index designed to represent the performance of global equity in the developed markets. It is a widely used index to measure the performance of global equity Mutual Funds and individual portfolios. The index is unmanaged and cannot be purchased directly by the investors. The MSCI World Index aims for 85% of free float adjusted market representation in each industry group of a country. The companies included in the indices are intended to replicate the industry composition for each market. The chosen list of stocks is composed of a representative sampling of large, medium, and small-cap companies from each local market, with liquidity being an important factor in the selection of index constituents. Stocks of non-domiciled companies and investment funds are excluded from the individual country indices. The goal of the MSCI's methodology is to create a benchmark which is highly replicable and investable, and provides a broad and fair market representation. At the end of March 2007, over 1,500 stocks from across 23 world markets were included in the MSCI World Index and the MSCI World Emerging Index (25 countries) contained a further 704 stocks.

 

Posted Date: 9/10/2012 6:50:22 AM | Location : United States







Related Discussions:- Global equity indexes, Assignment Help, Ask Question on Global equity indexes, Get Answer, Expert's Help, Global equity indexes Discussions

Write discussion on Global equity indexes
Your posts are moderated
Related Questions
Calculate Current cash debt coverage ratio: Financial statements for Delta Company are presented below:   Delta Company Balance Sheet December 31, 2012

Define the P/E valuation method. Under what circumstances should a stock be valued using this method? The P/E ratio points out how much investor are willing to pay for each dol

Illustrate the comparison between equity and debt Equity and Debt: A Comparison 1. Equity shares don't carry any fixed charges on them. If company doesn't generate positiv

It is a trust developed by a married couple with the purpose of minimizing estate taxes. An A-B trust is a trust that splits into two on the death of the first spouse. It is produc

Explain the term- Market penetration A strategy which pursues to increase sales of existing services or products to the same market. Price reduction strategies Aggre

Implants and implant systems since inception have been in continuous state of flux in terms of its design and surface. Likewise there has been a subtle change in the implant surgic

Define the meaning of objective - financial management The term objectives offers a normative framework. That is the focus in financial literature is on what a firm must try to

Explain learning outcomes of financial management By the end of this subject guide as well as having done the relevant readings and activities you should be able to

What are the misconceptions about Financial Management?

Along with the fixed capital nearly every Small-Scale industries requires working capital though the extent of working capital requirement differs in different businesses. Working