MSCI Rebalances - Emerging Market (EM) Index

Macminn, Karlene

MSCI Rebalances - Emerging Market (EM) Index

Thesis / Dissertation

2023

Abstract

This study investigates the effect of shares included and deleted from the MSCI Emerging Market Index (EM) between 2016 and 2020, during quarterly (QIR) and semi-annual index (SAIR) reviews. The analysis finds that when a share is included in MSCI Emerging Market Index, its price increases slightly following the announcement. After the announcement, there is a further increase during the period preceding the actual index change. The price increase for inclusions is permanent. When shares are excluded from the MSCI Emerging Market Index, the share price decreases slightly following the announcement, but gradually increases over time. This is not consistent with the starting premise that deletions would result in a negative share performance. Trading volumes increase slightly on actual announcement date and remain at a high level on actual effective date (i.e. date that the actual index changes) for both inclusions and deletions. Deletions has a greater and more significant impact on volume than inclusions.

Keywords

Finance and Tax

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Masters

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