MSCI EAFE
Encyclopedia
The MSCI EAFE Index is a stock market index
that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. It is maintained by MSCI Barra, a provider of investment decision support tools; the MSCI EAFE acronym stands for Morgan Stanley Capital International Europe
, Australasia
, and Far East
.
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. 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.
The index includes a selection of stocks from 22 developed market
s, 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.
's international fund (I Fund) tracks the net version of this index.
The iShares MSCI EAFE Index fund is based on this index. It is the fourth-largest ETF in the world.
Other options to invest in the EAFE include the Vanguard Developed Markets Index mutual fund (Investor Shares (VDMIX)), and the Vanguard Europe Pacific ETF .
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. It is maintained by MSCI Barra, a provider of investment decision support tools; the MSCI EAFE acronym stands for Morgan Stanley Capital International Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, Australasia
Australasia
Australasia is a region of Oceania comprising Australia, New Zealand, the island of New Guinea, and neighbouring islands in the Pacific Ocean. The term was coined by Charles de Brosses in Histoire des navigations aux terres australes...
, and Far East
Far East
The Far East is an English term mostly describing East Asia and Southeast Asia, with South Asia sometimes also included for economic and cultural reasons.The term came into use in European geopolitical discourse in the 19th century,...
.
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. 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.
The index includes a selection of stocks from 22 developed market
Developed market
In investing, developed markets are those countries that are thought to be the most developed and therefore less risky.-FTSE Group's list:FTSE Group, a provider of economic and financial data, assigns the market status of countries as Developed, Advanced Emerging, Secondary Emerging or Frontier on...
s, 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.
Investing
Many managers of North American international stock funds use the EAFE as a performance benchmark. For example, Thrift Savings PlanThrift Savings Plan
The Thrift Savings Plan is a defined contribution plan for United States civil service employees and retirees as well as for members of the uniformed services....
's international fund (I Fund) tracks the net version of this index.
The iShares MSCI EAFE Index fund is based on this index. It is the fourth-largest ETF in the world.
Other options to invest in the EAFE include the Vanguard Developed Markets Index mutual fund (Investor Shares (VDMIX)), and the Vanguard Europe Pacific ETF .