n Development Finance Agenda (DEFA) - Bond index : why the weighting methodology matters?

Volume 1, Issue 2
  • ISSN :



Indices have been around for centuries to measure performance and change. Many initiatives have been launched to construct weighted benchmark indexes to reproduce the underlying performance of emerging and African domestic bond markets. Investors use indices to measure the performance (i.e. beta) in those particular markets. The debt crises in Europe for both sovereign and corporate bonds have steered some investors to query the advantages of indexes constructed based on the traditional technique of market-capitalization. This paper looks specifically at cap-weighted fixed income indices.

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