Q. With reference to the MSCI Emerging Markets Index, consider the following statements:
1.It reflects the performance of large-cap and medium-cap companies in 25 nations.
2.India has the second-highest weightage in the index after China.
3.The MSCI EM is calculated using a Price-Weighted Methodology.
How many of the above statements are correct?:
Explanation –
Statements 1 and 2 are correct. The MSCI Emerging Markets Index (MSCI EM) is a market capitalization-weighted stock market index that tracks the performance of large and mid-cap stocks in emerging markets in 25 nations. It is one of the most widely used benchmarks for emerging market investing. The MSCI EM is a well-diversified and widely used benchmark for emerging market investing.
India was included in the index in 1994. Recently, after inclusion of nine Indian stocks, India’s current representation in MSCI EM index will be reached to 131 stocks. India, has the second-highest weightage in the index after China.
Statement 3 is incorrect. The MSCI EM is calculated using a free float-adjusted market capitalization methodology. This means that the index is weighted by the market capitalization of each constituent company, adjusted for the percentage of shares that are freely available for trading. This helps to ensure that the index is not overly influenced by companies that have a large number of restricted shares.
Source: ForumIAS
