Alternative Indexing with the MSCI World Index

Abstract

Fundamental and equal indexing have gained more importance in the recent past and meanwhile, a variety of alternative indexing ETFs is being offered to investors. We analyze the benefits from combining equal weighting and equal risk schemes with international diversification. For the MSCI World index, we find significant outperformance of these approaches over the cap-weighted index and we propose an implementation keeping turnover and transaction costs low.

Keywords: Alternative Indexing, Equal Weighting, MSCI World Index, ETF, Diversification, Risk

JEL Classification: B23, C33, G11, G12