US Equity Indices

  • The MSCI US Equity Indices reflect the full breadth of investment opportunities within the US equity markets by:
    • Capitalization size
    • Value and growth investment styles
    • Sectors/industries
  • The indices offer a better representation of market segments with greater style integrity:
    • Value and growth indices are defined using eight variables (three for value and five for growth)
    • Quarterly index reviews
    • Transparent rules based methodology
    • Free float-adjusted
  • Sector indices are calculated based on the Global Industry Classification Standard (GICS®)
  • Size and Style buffer zones reduce index turnover
  • The indices share common features with the MSCI Global Equity Indices
  • The above features make the MSCI US Equity Indices ideal for:
    • Conducting research on all segments of the US equity market
    • Asset allocation
    • Measuring and attributing portfolio performance
    • Developing financial products based on the indices

US Equity Indices - Structure

The figure below illustrates the market capitalization segments of the MSCI US Equity Indices.

The MSCI US Broad Market Index represents approximately 99.5% of the capitalization of the US equity market. It is the aggregation of the MSCI US Investable Market 2500 and the Micro Cap Indices. The MSCI US Broad Market Index represents a greater proportion of the US equity market cap than the most commonly used broad market indices.

The MSCI US Investable Market 2500 Index represents approximately 98% of the capitalization of the US equity market and is the aggregation of the Large Cap 300, Mid Cap 450 and Small Cap 1750 Indices. The MSCI US Micro Cap Index represents the micro cap companies in the US equity market, and targets for inclusion, approximately the bottom 1.5% of the U.S. equity market capitalization. The MSCI US Prime Market 750 Index represents the aggregation of the Large Cap 300 and the Mid Cap 450 Indices. All of the market cap indices, with the exception of the Broad Market, Micro Cap and Small + Micro Cap Indices, also have value and growth style sub-indices.

 

Features and Benefits of the MSCI US Equity Indices

The MSCI US Equity Methodology and Indices were developed based upon extensive investor consultations. Therefore, the new indices address the concerns that investors have voiced about existing US benchmarks. The new indices feature:

Market Capitalization Indices - Large, mid and small cap indices that better reflect the investment process of asset managers through the use of:
  • Timely index reviews - MSCI US Equity Indices will on a timely basis reflect the evolving equity markets through semi annual index rebalancings and quarterly index reviews
  • Transparent, rules based index methodology
  • Free float-adjustment

 

Market Cap Buffer Zones

  • Buffer zones offer two major benefits:
    • They reduce index turnover
    • They help the indices to better reflect the investment process of asset managers
This graph shows the MSCI US Equity Market Cap Indices in gray, with buffer zones in white.

Example of how the buffer zones work -- Assume security X is currently ranked as the 900th security in capitalization rank order. X is clearly a small cap security. Over time X rises in relative value to become the 700th security. It is now in the small cap buffer zone, but is still solely a member of the small cap index. When X moves fully through the buffer zone achieving a rank of 550 or higher, it will be removed from the small cap index and reclassified to the mid cap index at the next rebalancing. Please see the methodology book for further details.

 

Value and Growth Indices - For each market cap index*, MSCI has developed corresponding value and growth indices

  • Style integrity - Eight different variables (three for value and five for growth) are used to better represent value and growth styles
  • Style Buffer zones - The value and growth indices also feature Style buffer zones that reduce index turnover
  • Independently defined - The benchmarks define value and growth styles independently of each other using a new multi-factor approach
Value and Growth Variables**
  • Value attribute for index construction is defined using:
    • Book value to price ratio
    • 12-months forward earnings to price ratio
    • Dividend yield
  • Growth attribute for index construction is defined using:
    • Long-term forward earnings per share (EPS) growth rate
    • Short-term forward EPS growth rate
    • Current Internal Growth Rate
    • Long-term historical EPS growth trend
    • Long-term historical sales per share growth trend

* The Broad Market, Micro Cap and Small + Micro Cap Indices do not have value and growth sub-indices
** The definition of value and growth variables is available in the MSCI US Equity Methodology book, found here

Sector Indices - For each market cap index, MSCI has developed corresponding

  • Sector Indices
  • Industry Group Indices
  • Industry Indices
  • All based on the Global Industry Classification Standard (GICS)
US and Global Equity Indices

The MSCI US Equity Indices, together with the MSCI Global Equity Indices, allow asset owners and investment managers to efficiently manage and allocate domestic and global equity portfolios using MSCI's domestic and global equity indices, all sharing common features such as:
  • Consistent industry classification of US and international equity securities using the GICS
  • Consistent value and growth methodology
  • Consistent treatment of corporate events
  • Coordinated index rebalancings to minimize overall portfolio turnover
  • Consistent free float-adjustment methodology