Significant volatility during COVID-19 highlights a need for index reconstitution, but some may worry about trading costs and excess turnover. We investigate the balance between appropriate market representation and avoiding high index turnover.

Market liquidity around the globe has changed drastically over the past decade, due to a combination of regulatory, technological and investment changes. Relative trading volumes on many primary trading venues have dropped by about 50% since their peak in 2009. To ensure the investability and replicability of MSCI equity indexes, we regularly monitor the liquidity of index constituents, apply liquidity screening criteria and review index construction rules and liquidity measures. Methodology...