Index Quarterly
Reviews:
A Year of Transition
In February 2023, MSCI transitioned to a comprehensive schedule
for the quarterly reviews of its market cap indexes, prompted byconsultations with market participants.
This strategic change reflects our commitment to listening to market
participants and ensuring that our index construction continues toeffectively respond to the dynamic nature of markets. More specifically,
this major enhancement is intended to promptly reflect equity market
changes in our indexes, distributing index turnover more evenly acrossreviews without impacting the total annual index turnover.
Our quarterly reviews now enable a full review of the investable universe
four times a year instead of two, as was the case under the previousschedule. This means that newly listed securities, or securities meetingindex inclusion requirements may be included in our indexes faster,which would improve the capture of markets by our indexes. It alsomeans that less investable securities may be deleted sooner, whichwould improve our indexes’ investability. Company size (large, mid, smallor micro-cap definitions) is also fully assessed at each index review,
improving the timeliness of our size-segmentation classification.
To mark the first anniversary for this change, we have analyzed theimpact of 2023 quarterly reviews and compared it to previous years.

msci.comIndex turnoverIn the historical analysis we undertook at the time of the market consultation, we had noted aminimal impact on the annual turnover and a decrease in the average turnover for each quarterly
rebalance for the simulated MSCI World and MSCI Emerging Market indexes. In 2023, the index
review characteristics were at least in line with these observations, and in some instances evenahead of expectations.
Indeed, the charts below show that the 2023 total annual turnover for both MSCI World andMSCI Emerging Market indexes was lower than the average levels observed in the preceding fivecalendar years.
MSCI World Index - Annual Rebalance Turnover
3.50

Annual Turnover (%)

3.00

5-yearto to2023:
2.5%5-yearaverage
averageprior
prior
2023:
2.5%

2.50
2.00
1.50
1.00

2.0

2.5

3.1

2.5

2.2

2.22022

2023

0.50

Also, in 2023, we witnessed a lower quarterly average
turnover compared to the semi-annual index reviews
conducted in May and November for preceding years,
when a comparable full reconstitution used to takeplace.

Quarterly
average

MSCI WorldIndex

MSCIEmerging
Markets

2018

0.70%

2.60%

2019

0.87%

4.05%

2020

1.20%

3.26%

2021

0.82%

2.25%

2022

0.74%

1.92%

2023

0.55%

1.43%

2018 – 2022: average turnover of May and November reviews2023 - average turnover of February, May, August and November
reviews

0.00
201820192020

2021

MSCI EM Index - Annual Rebalance Turnover
12.0 0

Annual Turnover (%)

10.0 05-yearprior
to 2023:
7.0%
5-yearaverage
averageprior
to 20237%

8.00
6.00
4.00

9.8
6.3

7.6

6.2

2.00

5.0

5.7

2022

2023

0.00
2018

2019

2020

2021

The data presented in all charts and tables is as of December 31, 2023.

msci.comNumber of additions and deletions
Our historical analysis didn’t indicate a meaningful
impact on the annual number of additions anddeletions driven by index reviews, post theintroduction of the new rebalancing schedule. Also,
since our goal was to spread the impact of index
changes more evenly throughout rebalances, theexpectation was that the number of additions anddeletions in May and November would reduce, as
more of them would have been implemented inFebruary and August.
Starting with the annual results, for both the MSCIWorld and MSCI Emerging Markets indexes, thetotal number of additions and deletions for 2023

Index Reviews

MSCI World Index

was below the 5-year averages. It should be notedthat the high number of additions in the MSCIEmerging Markets Index in 2018 and 2019 waslinked to the staggered inclusion of China A shares.

MSCI Emerging Markets Index

Constituent change

Additions

Deletions

Additions

Deletions

2018

48

45371

79

2019

83

62341

59

2020

115

154

181

181

2021

63

88200

122

2022

63

79

142

127

2018-2022 Average

74

86

247

114

2023

53

74

174

104

In the charts below, we provide a quarterly view of number of additions and deletions for 2023 and the five preceding years. Additions are shown above thex-axis while deletions are shown below.

MSCI EM Index - Number of Additions and Deletions

MSCI World Index - Number of Additions and Deletions
350

100300Additions

250

40

200

201500100-2 050

-4 00
-5 0
-1 00

Nov, 2023

Aug, 2023

Feb, 2023

May, 2023

Nov, 2022

Aug, 2022

May, 2022

Feb, 2022

Nov, 2021

Aug, 2021

May, 2021

Feb, 2021

Nov, 2020

Aug, 2020

Feb, 2020

Nov, 2019

Aug, 2019

Feb, 2019

Deletions

May, 2019-1 50

Nov, 2018

Nov, 2023

Aug, 2023

Feb, 2023

May, 2023

Nov, 2022

Aug, 2022

May, 2022

Feb, 2022

Nov, 2021

Aug, 2021

Feb, 2021

May, 2021

Nov, 2020

Aug, 2020

May, 2020

Feb, 2020

Nov, 2019

Aug, 2019

Feb, 2019

May, 2019Nov, 2018

Aug, 2018

May, 2018

Feb, 2018-1 00

May, 2020

Deletions-8 0Aug, 2018

-6 0Additions

May, 2018

60Feb, 201880

As expected, the number of additions and deletions in February and August 2023 was higher than for equivalent months in most of the prior rebalances, given thatnow we undertake a deeper rebalance every quarter. On the other hand, the number of additions and deletions in May and November 2023 was lower than for thesame months in previous rebalances.

Conclusion
We decided to evolve our index methodology
so that our indexes would reflect changes in
the overall equity market comprehensively on
more frequent basis. From an implementation
standpoint, the new rebalancing schedule wasdesigned to reduce the size of any individual
quarterly rebalance by spreading index review
changes and turnover more evenly.
As we review the results of the first year of thisnew rebalancing schedule, we are pleased tonote that the changes in the index turnover andadditions/deletions were above the expectations
set by our previous research.
We remain committed to listening to market
participants and to continuously look formethodology and process improvements toensure that our indexes remain investable andevolve with the market they seek to represent.

msci.com

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