Should Vietnamese firm’s stocks be listed in a MSCI Global Equity index? Experience drawn from the sample of 30 countries

This study was conducted to investigate the argument of the increased co‐movement between the return of stocks, which are added to an MSCI Global Equity Index (MSCI Index) and the returns of the market index. It means that inclusion of the newly added stocks in an index leads to increased comovement between these stocks and the rest of the index. The MSCI Index is a broad and investable global equity benchmark and serve as the basis for over 500 exchange traded funds throughout the world. Our sample covers the MSCI Index inclusions from May 2003 to August 2008, corresponding to 16 adjustment quarters. Over this period, we have 1,274 index inclusion events over 46 countries in total. We found that inclusion into the MSCI Index leads to on average a higher beta with the national index. 21 out of the 30 countries in our sample experienced an increase in beta in the post‐inclusion period. Given the two stock exchanges in Vietnam are young in terms of a number of years since establishment and a small size of the market by the international standard, caution is required when evidence from wellestablished and matured markets used in this study is drawn. Nevertheless, the implications for listed firms in Vietnam are that their stocks will be more frequently traded by various groups of investors as long as the stocks are listed with an MSCI index, including the powerful MSCI Frontier Markets Indexes of 26 countries in the world.