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24-690: The index is market-capitalization weighted (meaning that the weight of securities is based on their respective market capitalizations). It first ranks each stock in the investable universe from largest to smallest by market capitalization. The largest 70% will compose the MSCI EAFE Large Cap (new index), the largest 85% will compose the MSCI EAFE Standard, and the largest 99% will compose the MSCI Investable Market index (IMI). The 71st to 85th percentiles represent

48-419: A corporation that are in the hands of public investors as opposed to locked-in shares held by promoters, company officers, controlling-interest investors, or governments. This number is sometimes seen as a better way of calculating market capitalization , because it provides a more accurate reflection (than entire market capitalization) of what public investors consider the company to be worth. In this context,

72-406: A public limited company under UK law. Also, the company should have published or filed audit accounts for at least a three-year period, have trading and revenue earning records for at least three years, its higher management and directors must be competent enough to run a business at that scale, and the company must show that it has a working capital for at least 12 months. Moreover, once the company

96-543: A better asset to liability ratio. By public floating, companies can enhance their credit image. As banks and other credit providing institutions provide credit, more often to a public limited company along with this, sometimes favorable terms are also offered by credit providers because of public limited company status. Along with enhanced credibility, companies can also get higher media coverage and attention of general public. By public floating, companies are vulnerable to threats of speculations and market fluctuations. During

120-449: A company are also very complex. For example, in the UK, in order to run a public limited company , a register of the directors, shareholders, and any shareholder votes, as well as all details of the company's finances must be compiled and kept for a minimum of six years. Along with this, a comprehensive accounting record is also needed like sales and whom they are made to (until and unless it is

144-400: A company to perform. Whenever the general public, as company shareholders, demand dividends without keeping the company's economic circumstances in proper perspective, it increases performance pressure on the company. Secondly, sometimes companies provide false financial reports to sell shares which lead towards further complications in market. In 2005, AIG had to pay a fine of $ 1.7 billion as

168-466: A result of improper accounting. Additionally, Lehman Brothers went bankrupt in 2008 after using a small firm to secretly manipulate its balance sheets. Both cases illustrate that, as a result of pressure to sell shares, companies may manipulate their financial statements, and later face the consequences (Lehman Brothers' bankruptcy in 2008, AIG's bailout by the U.S. government in 2008). Less public float may cause illiquidity of stocks of companies due to

192-412: A retail business), purchases and from whom they are supplied, stock and debts – all of them are necessary to be provided. Along with all these costs, taxes are also to be paid while a company is public floating. For instance, in the UK a company has to pay corporation tax which is 20% if the profit per year is £300,000 or less and 21% if profit is above £300,000. Public floating also increases pressure on

216-630: A stock index's value. The impact that individual stock's price change has on the index is proportional to the company's overall market value (the share price multiplied by the number of outstanding shares), in a capitalization-weighted index. In other types of indices, different ratios are used. For example, the NYSE Amex Composite Index (XAX) is composed of all of the securities traded on the exchange including stocks and American depositary receipts (ADRs). The weighting of each component shifts with changes to each securities' price and

240-434: Is listed, the business must be independent from any shareholder with controlling interest (anyone owning more than 30% of the company shares), and after the company is listed, at least 25% of its shares must be in the hands of the general public, that is public float, and the company must have a total market capitalization of not less than £700,000. By offering a public float, companies gain access to new and large capital, as

264-623: Is similar to EFA but its portfolio represents nearly all of each country's investable market capitalization, while EFA only covers the top 85%, which excludes most small-cap stocks. The TIAA International Equity Index Fund is also based on the EAFE index. Vanguard has the mutual fund Vanguard Developed Markets Index Inv and the Vanguard FTSE Developed Markets ETF; these funds previously used the MSCI EAFE, but now use

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288-606: Is weighted in this manner is said to be "float-adjusted" or "float-weighted", in addition to being cap-weighted. For example, the S&;P 500 index is both cap-weighted and float-adjusted. Historically, in the United States, capitalization-weighted indices tended to use full weighting, i.e., all outstanding shares were included, while float-weighted indexing has been the norm in other countries, perhaps because of large cross-holdings or government ownership. More recently, many of

312-451: The float may refer to all the shares outstanding that can be publicly traded. The float is calculated by subtracting the locked-in shares from outstanding shares. For example, a company may have 10 million outstanding shares, with 3 million of them in a locked-in position; this company's float would be 7 million (multiplied by the share price). Stocks with smaller floats tend to be more volatile than those with larger floats. In general,

336-438: The 2008 financial crisis, several companies went bankrupt because of fluctuations in the stock market, severely limiting their operating capital to the extent that they were unable to pay their creditors and were forced to liquidate their operational assets. Costs of company registration are also very high making it difficult for certain small businesses to float shares. Along with higher costs, processes of registering and running

360-403: The EAFE as a performance benchmark. For example, Thrift Savings Plan 's international fund (I Fund) tracks the net version of this index. The iShares MSCI EAFE Index fund is based on the standard index. EFA is the fourth-largest ETF in the world. They also have iShares MSCI EAFE Small-Cap which has just the small caps. iShares Core MSCI EAFE fund uses the "IMI" version of the index. This fund

384-553: The FTSE Developed All Cap ex US Index, which is very similar but includes South Korea and Canada, and includes exposure to small-cap stocks. Capitalization-weighted index A capitalization-weighted (or cap-weighted ) index , also called a market-value-weighted index is a stock market index whose components are weighted according to the total market value of their outstanding shares . Every day an individual stock's price changes and thereby changes

408-641: The MSCI EAFE Mid Cap, and the 85th to 99th percentiles represent the MSCI EAFE Small Cap. The index includes a selection of stocks from 21 developed markets , but excludes those from the U.S. and Canada. The index has been calculated since 31 December 1969, making it the oldest truly international stock index. It is probably the most common benchmark for foreign stock funds in the U.S. The MSCI EAFE index includes stocks of around 1500 companies from these countries and regions: These are

432-544: The U.S. indices, such as the S&;P 500, have been changed to a float -adjusted weighting which makes their calculation more consistent with non-U.S. indices. An index may also be classified according to the method used to determine its price. In a price-weighted index such as the Dow Jones Industrial Average , the price of each component stock is the only consideration when determining the value of

456-460: The general public can invest in the company. This new capital is then used to increase the company's profits. By public floating, a company gains access to interest-free capital as there is no interest to be paid on shares. Though a dividend may be involved, the terms of dividend liability are far more flexible than terms for loans. Along with this, shares are not considered as a debt, and by public floating, companies can reduce their debts creating

480-447: The government, royalty, or company insiders (see float ). For example, if for some stock 15% of shares are closely held, and the other 85% are publicly held, the float factor will be 0.85, by which the company's market capitalization will be multiplied before weighting its value against the rest of the index. In other words, the number of shares used for calculation is the number of shares "floating", rather than outstanding. An index that

504-423: The index. Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively high-value name. In a fundamentally weighted index, stocks are weighted by fundamental factors like sales or book value. Public float In the context of stock markets , the public float or free float represents the portion of shares of

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528-471: The large holdings of founding shareholders, corporate cross-holdings, and government holdings in partially privatized companies are excluded when calculating the size of a public float. There are certain regulations to offer public floats, though these regulations might differ from region to region. For instance, to offer public floats in the United Kingdom, a company must be incorporated, i.e. be

552-426: The number of shares outstanding. The index moves in line with changes in price of the component. Stock market indices are a type of economic index . A common version of capitalization weighting is the free-float weighting. With this method a float factor is assigned to each stock to account for the proportion of outstanding shares that are held by the general public, as opposed to "closely held" shares owned by

576-549: The same countries and regions as for MSCI World except without the U.S. and Canada. Africa and South America are not represented. Greece was part of this index from May 2001, when MSCI upgraded Greece from emerging market to developed market, to November 2013 when MSCI downgraded Greece from developed to emerging market. Israel joined this index in May 2010 when MSCI upgraded Israel from emerging market to developed market. Many managers of North American international stock funds use

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