Investments, tenth edition

  

  Market Capitalization  

  

  

  

  

  Billions of   

U.S. Dollars  

  Percent of   

World  

  Annual 

Growth 

(%)  

  GDP  

  GDP 

per 

Capita  

  Market  

 Capitalization 

as % of GDP  

  

  2000  

  2011  

  2000  

  2011  

  2000–2011  

  2010  

  2010  

  2010  

  World  

  27,473  

  38,200  

    100%  

    100%  

  2.8  

  63,124  

  9,228  

  68  

 U.S.  

12,900  

 13,917  

 47.0  

36.4  

0.6  

14,587  

47,199  

 98  

 Japan  

3,140  

 3,289  

 11.4  

8.6  

0.4  

5,459  

42,831  

 69  

 U.K.  

2,566  

 2,794  

 9.3  

7.3  

0.7  

2,249  

36,144  

 133  

 Canada  

615  

 1,581  

 2.2  

4.1  

8.2  

1,577  

46,236  

 114  

 France  

1,278  

 1,455  

 4.7  

3.8  

1.1  

2,560  

39,460  

 70  

 Hong Kong 

 564  

 1,369  

 2.1  

3.6  

7.7  

225  

31,758  

 701  

 Germany  

1,061  

 1,177  

 3.9  

3.1  

0.9  

3,281  

40,152  

 43  

 Switzerland  

783  

 1,062  

 2.9  

2.8  

2.6  

528  

67,464  

 224  

 Australia  

349  

 1,039  

 1.3  

2.7  

9.5  

925  

42,131  

 132  

 Korea  

123  

 763  

 0.4  

2.0  

16.4  

1,015  

20,757  

 86  

 Spain  

331  

 546  

 1.2  

1.4  

4.2  

1,407  

30,542  

 44  

 Italy  

716  

 460  

 2.6  

1.2 

  2 3.6 

 2,051  

33,917  

 28  

 Sweden  

274  

 440  

 1.0  

1.2  

4.0  

459  

48,936  

 118  

 Netherlands  

680  

 376  

 2.5  

1.0 

  2 4.8 

 779  

46,915  

 60  

 Mexico  

112  

 372  

 0.4  

1.0  

10.5  

1,035  

9,123  

 39  

 Norway  

52  

 238  

 0.2  

0.6  

13.5  

413  

84,538  

 61  

 Chile  

44  

 229  

 0.2  

0.6  

14.7  

213  

12,431  

 136  

 Belgium  

159  

 216  

 0.6  

0.6  

2.6  

469  

43,144  

 54  

 Denmark  

99  

 176  

 0.4  

0.5  

4.9  

310  

55,891  

 67  

 Turkey  

50  

 164  

 0.2  

0.4  

10.4  

734  

10,094  

 34  

 Finland  

280  

 139  

 1.0  

0.4 

  2 5.7 

 239  

44,512  

 86  

 Israel  

46  

 119  

 0.2  

0.3  

8.3  

217  

28,504  

 80  

 Poland  

27  

 112  

 0.1  

0.3  

12.5  

469  

12,293  

 34  

 Austria  

28  

 85  

 0.1  

0.2  

9.8  

379  

45,209  

 33  

 Ireland  

82  

 65  

 0.3  

0.2 

  2 1.9 

 211  

47,170  

 30  

 Portugal  

64  

 59  

 0.2  

0.2 

  2 0.6 

 229  

21,505  

 35  

 Czech Rep. 

 12  

 39  

 0.0  

0.1  

10.4  

192  

18,245  

 23  

 New Zealand 

 20  

 35  

 0.1  

0.1  

5.0  

136  

31,067  

 35  

 Luxemburg  

28  

 34  

 0.1  

0.1  

1.7  

53  

105,438  

 79  

 Greece  

72  

 29  

 0.3  

0.1 

  2 7.1 

 301  

26,600  

 21  

 Hungary  

12  

 19  

 0.0  

0.0  

4.1  

129  

12,852  

 22  

 Slovenia  

2  

 6  

 0.0  

0.0  

11.2  

47  

22,851  

 18  

 Table 25.1 

 Market capitalization of stock exchanges in developed countries 

 Source: Market capitalization: Datastream,   online.thomsonreuters.com/datastream   ;  GDP and GDP per capita: The World Bank,   data.worldbank.org   .  

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885

  

  Market Capitalization  

  

  

  

  

  Billions of  

 U.S. Dollars  

  Percent of   

World  

  Growth 

(%)  

  GDP  

  GDP  

 per 

Capita  

  Market  

 Capitalization 

as % of GDP  

  

  2000  

  2011  

  2000  

  2011  

  2000–2011  

  2010  

  2010  

  2010  

 Brazil  

180  

1,056  

0.7  

2.8  

15.9  

2,088  

10,710  

 66  

 India  

107  

868  

0.4  

2.3  

19.0  

1,727  

1,475  

 69  

 Russia  

19  

694  

0.1  

1.8  

34.9  

1,480  

10,440  

 58  

 China  

13  

499  

0.0  

1.3  

35.2  

5,927  

4,428  

 11  

 Taiwan  

177  

455  

0.6  

1.2  

8.2  

430  

18,300  

 134  

 Singapore  

136  

428  

0.5  

1.1  

10.1  

209  

41,122  

 241  

 South Africa 

 104  

405  

0.4  

1.1  

12.0  

364  

7,275  

 134  

 Malaysia  

83  

330  

0.3  

0.9  

12.1  

238  

8,373  

 135  

 Indonesia  

21  

301  

0.1  

0.8  

24.8  

707  

2,946  

 41  

 Thailand  

23  

219  

0.1  

0.6  

20.7  

319  

4,608  

 70  

 Colombia  

4  

191  

0.0  

0.5  

37.3  

288  

6,225  

 70  

 Philippines  

20  

141  

0.1  

0.4  

17.6  

200  

2,140  

 67  

 Peru  

5  

77  

0.0  

0.2  

25.9  

157  

5,401  

 64  

 Argentina  

24  

36  

0.1  

0.1  

3.6  

369  

9,124  

 15  

 Pakistan  

5  

26  

0.0  

0.1  

15.2  

177  

1,019  

 17  

 Sri Lanka 

 1  

14  

0.0  

0.0  

27.5  

50  

2,375  

 31  

 Romania  

0  

14  

0.0  

0.0  

36.9  

162  

7,538  

 9  

 Venezuela  

6  

6  

0.0  

0.0 

  2 0.2 

 392  

13,590  

 3  

 Cyprus  

9  

3  

0.0  

0.0 

  2 9.7 

 23  

28,779  

 28  

 Bulgaria  

0  

2  

0.0  

0.0  

29.6  

48  

6,325  

 4  

 Table 25.2 

 Market capitalization of stock exchanges in emerging markets 

 Source: Market capitalization: Datastream,   online.thomsonreuters.com/datastream   ;  GDP and GDP per capita: The World Bank,   data.worldbank.org   .  

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886 

P A R T   V I I

  Applied Portfolio Management

Market capitalization as a percent of GDP of the BRICS countries (Brazil, Russia, India, 

China, and South Africa) is still below 70% (only 11% in China!), suggesting that these 

emerging markets are expected to show significant growth over the coming years, even with-

out spectacular growth in GDP. 

 The growth of capitalization in emerging markets over this period was much more vola-

tile than growth in developed countries, implying that both risk and rewards in this seg-

ment of the globe may be substantial.  

  Market Capitalization and GDP 

 A contemporary view of economic development (rigorously stated in de Soto, 2000) holds 

that an important requirement for economic advancement is a developed code of business 

laws, institutions, and regulations that allows citizens to legally own, capitalize, and trade 

capital assets. As a corollary, we expect that development of equity markets will serve as 

a catalyst for enrichment of the population, that is, that countries with larger relative capi-

talization of equities will tend to be richer. For rich countries, with already-large equity 

markets, this relationship will be weaker. 

  Figure  25.1   depicts  the  relationship  

2

   between per capita GDP and market capitalization 

(where both variables have been transformed to log 

10

  scale).  Figure 25.1 , panel A shows a scat-

ter diagram and regression line for 2000, while the situation in 2011 is shown in  Figure 25.1 , 

panel B. While developed markets are mostly above the line and emerging markets mostly 

below it, the latter dramatically moved up in relative market capitalization over these years. 

This move was sufficient to greatly moderate the slope of the line. One can also easily see the 

upward shift of the whole world on the vertical axis that measures per capita GDP.   

 The regression slope coefficient measures the average percent change in per capita 

income when market capitalization increases by 1%. In 2000, this value was .64, but it fell 

to .35 in 2011. The scatter around the regression line has also visibly grown, as reflected in 

an R-square of .52 in 2000 but only .10 in 2011.