The MSCI Emerging Markets Index measures equity markets in 21 emerging market countries and is used as a benchmark for professional money managers, investors, and researchers. It is also used for ETFs, index funds, and other index-linked derivative contracts. Investing in emerging markets is generally considered riskier but can offer higher returns and diversification benefits.
The Morgan Stanley Capital International (MSCI) Emerging Markets Index measures the overall performance of equity markets in 21 emerging market countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, the Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. Given the need for a data source that reliably and accurately measures the performance of equity markets in emerging market countries over the long term, the MSCI index has become a de facto benchmark for professional money managers. and other investors, as well as for economists and other researchers. With the globalization of capital and the advent and growth of exchange-traded funds (ETFs), the MSCI Emerging Markets Index is also used as a benchmark for emerging market ETFs, other types of index funds, and futures, options, index-linked options. and other index-linked derivative contracts.
The stock market indices of 21 emerging market countries, ETFs and other passively managed index funds based on the MSCI Emerging Markets Index offer US investors a simple and profitable means of gaining broad exposure to emerging markets at world level. Essentially, the index is compiled by consolidating and recalibrating each constituent’s MSCI Country Index, weighting it according to its respective free float market capitalization, and then summing. The MSCI Emerging Markets Index is just one of a wide range of international, national, regional, industry and sector indices produced by Morgan Stanley. Other international indices include: the MSCI All Country World & Frontier Markets Index, the largest published by the company; the MSCI Frontier Markets Index, an index of equity markets in countries considered to be less economically developed than those of the MSCI Emerging Markets Index; and the MSCI Emerging & Frontier Markets Index, which combines the emerging and frontier market indices.
Investing in emerging equity markets is, by nature, as well as by definition, generally considered riskier than investing in those of their developed country counterparts. The highest currency, economic, and political or country risk is typically associated with the equity markets of emerging market countries. In theory at least, investors should be compensated for these risks, as well as the typically higher volatility of equity markets in emerging market countries, for the potential for higher returns. Also, to the extent that they have existed, the past returns and past performance of the stock markets of emerging countries have generally been weakly correlated with those of developed countries. Therefore, investing in them has traditionally been viewed as a means of reducing the overall risk of an investment portfolio through diversification.
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