The MSCI EAFE is a stock market index of foreign stocks, from the perspective of a North American investor. The index is market-capitalization weighted (meaning that the weight of securities is based on their respective market capitalizations). It first ranks each stock in the investable universe from largest to smallest by market capitalization. Basically, the largest 70% will comprise the MSCI EAFE Large Cap (new index), the largest 85% will comprise the MSCI EAFE Standard, and the largest 99% will comprise the MSCI Investable Market index (“IMI”). The 71st to 85th percentiles represent the MSCI EAFE Mid Cap, and the 85th to 99th percentiles represent the MSCI EAFE Small Cap. It is maintained by MSCI Barra[1]; the EAFE acronym stands for Europe, Australasia, and Far East.
The index includes a selection of stocks from 21 developed markets[2], but excludes those from the U.S. and Canada. The index has been calculated since 31 December 1969, making it the oldest truly international stock index. It is probably the most common benchmark for foreign stock funds.
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National Diversification
The index includes stocks from the following countries as of September 30, 2009:
| Country | Weight |
|---|---|
| Japan | 21.4% |
| United Kingdom | 20.7% |
| France | 10.9% |
| Australia | 8.2% |
| Germany | 8.1% |
| Switzerland | 7.7% |
| Spain | 4.8% |
| Italy | 3.7% |
| Sweden | 2.8% |
| Netherlands | 2.5% |
| Hong Kong | 2.3% |
| Singapore | 1.4% |
| Finland | 1.2% |
| Belgium | 1.0% |
| Denmark | 0.9% |
| Norway | 0.7% |
| Greece | 0.6% |
| Austria | 0.3% |
| Portugal | 0.3% |
| Ireland | 0.3% |
| New Zealand | 0.1% |
Weights of regions
As of 2009-09-30, the weight of the stocks from the various regions was as follows:
- Europe (excluding United Kingdom) 45.9%
- United Kingdom 20.7%
- Japan 21.4%
- Asia-Pacific (excluding Japan) 12.0%
Annual Returns
Three versions of the index exist: price, net, and gross.[3] These versions differ in how dividends are accounted for. The price version does not account for dividends—it only captures the changes in the prices of the index components. The gross version reflects the effects of dividend reinvestment. Finally, the net version reflects the effects of dividend reinvestment after the deduction of withholding tax.
The following table shows the annual returns of the three versions of the index.
| Year | Price | Net | Gross |
| 1991 | 10.19 | 12.13 | 12.50 |
| 1992 | −13.89 | −12.17 | −11.85 |
| 1993 | 30.49 | 32.56 | 32.94 |
| 1994 | 6.24 | 7.78 | 8.06 |
| 1995 | 9.42 | 11.21 | 11.55 |
| 1996 | 4.40 | 6.05 | 6.36 |
| 1997 | 0.24 | 1.78 | 2.06 |
| 1998 | 18.23 | 20.00 | 20.33 |
| 1999 | 25.27 | 26.97 | 27.30 |
| 2000 | −15.21 | −14.17 | −13.96 |
| 2001 | −22.61 | −21.44 | −21.21 |
| 2002 | −17.52 | −15.94 | −15.66 |
| 2003 | 35.28 | 38.59 | 39.17 |
| 2004 | 17.59 | 20.25 | 20.70 |
| 2005 | 10.86 | 13.54 | 14.02 |
| 2006 | 23.47 | 26.34 | 26.86 |
| 2007 | 8.62 | 11.17 | 11.63 |
Investing
Many managers of North American international stock funds use the EAFE as a performance benchmark. For example, Thrift Savings Plan's international fund tracks the net version of this index.
iShares MSCI EAFE Index fund (Template:Nysearca) is based on this index. It's the second-largest ETF in the world.
References
External links
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
