Investments, tenth edition

   Developed Countries 

 To appreciate the myopia of an exclusive investment focus on U.S. stocks and bonds, consider 

the data in  Table 25.1 . The U.S. accounts for less than 40% of world stock market capitaliza-

tion. Clearly, active investors can attain better risk–return trade-offs by extending their search 

for attractive securities to both developed and emerging markets. Developed countries made 

up 68% of world gross domestic product in 2010, and 85% of the world market capitalization.  

 The first two columns of  Table 25.1  show market capitalization in 2000 and 2011. The first 

line shows capitalization for all world exchanges, showing total capitalization of corporate equity 

in 2011 as $38.2 trillion, of which U.S. stock exchanges made up $13.9 trillion, or 36.4%. The 

year-to-year changes in the figures in these columns demonstrate the volatility of these markets. 

 The next three columns of  Table 25.1  compare country equity capitalization as a per-

centage of the world’s in 2000 and 2011, as well as the growth in capitalization over those 

12 years. The two crises of the first dozen years of the 21st century, the bursting of the 

tech bubble in 2000–2001 and the financial crisis of 2008–2009, hit the developed coun-

tries hardest. Average growth of developed-country equity markets over these years was an 

anemic 1.7%, compared with a world average of 2.8% and 16.3% for emerging markets. 

 The last three columns of  Table 25.1  show GDP, per capita GDP, and the equity capi-

talization as a percentage of GDP in 2010. Although per capita GDP in developed coun-

tries is not as variable across countries as total GDP, which is determined in part by total 

population, market capitalization as a percentage of GDP is quite variable. This suggests 

widespread differences in economic structure even across developed countries.