posted on 06-06-2019

Europe, Australasia, Far East (EAFE)

Updated October 1, 2019

What it is:

Europe, Australasia, Far East (or EAFE) refers to the economically developed regions of the world outside the United States and Canada.

How it works/Example:

The EAFE is a broad market cap-weighted index that was formulated by Morgan Stanley Capital International (MSCI) to represent equity market performance in the developed world beyond North America. Twenty-one other MSCI stock indices for these regions are comprised in the EAFE index. European markets not including the UK markets account for roughly 50% of the index followed by the markets of the United Kingdom at 19%, Japanese markets at 23%, and Asia-Pacific markets at 8%. The EAFE's ten largest stocks account for roughly 15% of its total value.

More than half of the securities the EAFE is comprised of are in the financial, consumer, and industrial sectors. A comparable indicator in the United States would be the Dow Jones Industrial Average.

Why it matters:

The MSCI-EAFE index is often used in the financial industry to compare the performance of American markets with those of the rest of the developed world. Investors interested in investing in these regions can purchase shares of iShares MSCI EAFE Index fund (NYSE: EFA), an ETF that tracks the performance of the MSCI EAFE Index.