MSCI Launches Risk-Weighted Indices

These alternatively weighted indices are based on three standard flagship MSCI indices and include the MSCI ACWI Risk Weighted Index, the MSCI Emerging Markets Risk Weighted Index and the MSCI World Risk Weighted Index.  

According to the announcement, the MSCI Risk Weighted Indices use a transparent process to capture lower risk characteristics than traditional cap weighted indices. Each MSCI Risk Weighted Index reweights all the constituents of a cap weighted MSCI parent index so that stocks with lower historical return variance are given higher index weights.   

By emphasizing low volatility stocks in this way, the MSCI Risk Weighted Indices have historically exhibited lower realized volatility compared to their respective parent MSCI indices, while maintaining reasonable liquidity and capacity and a full representation of the parent index, the announcement said.