GDP Weighted Asset Allocation, February 2010

Abstract

In this bulletin, we examine the effects of an alternative global index weighting scheme that weights countries in a regional index by their GDP. This strategy has led to a superior performance of the MSCI All Country World, MSCI World, and MSCI Emerging markets GDP Weighted indices in the past 40 years when compared to their market capitalization weighted counterparts. We also list possible reasons that could explain this historical outperformance.

Keywords: alternative global index, weighting scheme, countries regional index, GDP, MSCI, All Country World, MSCI World, MSCI Emerging markets, market capitalization, historical outperformance