One index, many regions: revenue distribution and index performance : Evidence from the Euro Stoxx 50

Abstract

This thesis investigates an alternative perspective on the Euro Stoxx 50 index by incorporating the regional revenue exposure of its constituents when analyzing comovement with global and regional MSCI equity indexes. While previous academic research has typically evaluated index correlations based on the listing locations of their constituent companies, this approach overlooks the fact that many firms operate globally and derive significant revenues outside their home countries. The objective of this study is therefore to determine whether accounting for international revenues enhances the understanding of co-movement between indexes.

Focusing on the period from 2019 to 2024, the study deconstructs the Euro Stoxx 50 by allocating each constituent’s revenue across five regions: Europe, the Middle East and Africa, Asia-Pacific, the Americas, and the rest of the world, with an additional residual category for undisclosed or other revenues. These regional revenue shares are then used to weight the returns of corresponding MSCI regional indexes, forming a revenue-weighted composite index referred to in this thesis as the models. This approach builds on existing literature suggesting that risk premiums for multinational corporations are more closely tied to the scope and scale of their global operations rather than their domestic performance alone.

The empirical results, based on regression analysis, demonstrate that the revenue-weighted model closely tracks the performance of the Euro Stoxx 50 and explains its return dynamics better than any single regional or global index, with the exception of the MSCI AC Europe and Middle East index. Notably, the model exhibits stronger correlation with other global and regional indexes and significantly aligns with the performance of the MSCI AC World Index. These findings indicate that incorporating firms’ international revenue structures yields a more precise understanding of index behavior and offers valuable insights for both investors and index developers.

By expanding the conceptual framework of international portfolio analysis, this study offers a meaningful contribution to global finance, especially in the context of geopolitical and macroeconomic uncertainty. It lays the groundwork for future research on how multinational corporations and the indexes that represent them could alternatively be evaluated, weighted, and interpreted within global investment strategies.