Should capital cost calculation be based on a global or local market benchmark? The December 2000 redefinition of the global MSCI equity index was a natural experiment addressing this question. It is argued that this event triggered a portfolio shift (by index funds) large enough to affect the...

Should capital cost calculations be based on a global or local market benchmark? The large-scale redefinition of the global MSCI equity index in December 2000 represents a natural experiment to address this important question. It is argued that the MSCI index revision triggered a portfolio shift...