The Market Cap to GDP Ratio (also known as the Buffett Indicator) is a measure of the total value of all publicly-traded stocks in a country, divided by that country’s Gross Domestic Product (GDP). It used as a
The value of the market cap to GDP ratio is affected by the fraction of companies that are public as opposed to the number of private companies in the economy. Moreover, trends in theinitial public offerings (IPOs)of newly public companies also impact the value of the ratio. Practical Examp...
And here is the chart of the market cap to GDP ratio itself: As you’ll notice, the CAPE ratio and the Cap/GDP ratio correlate very closely, which further strengthens the case that the CAPE ratio is a reliable measure of market valuation. Shortcomings of CAPE and Cap/GDP CAPE: The CAPE...
The table below displaysthe total market cap-to-GNI (GDP) ratiosfor the world’s largest economies. This ratio, also known asthe Buffett Indicator, can be used to assess a country’s stock market valuation by comparing its current level to historical averages, providing possible insight into ...
The Stock Market is Significantly Overvalued according to Buffett Indicator. Based on the historical ratio of total market cap over GDP (currently at 197.5%), it is likely to return 0.5% a year from this level of valuation, including dividends. ...
market cap to gdpmarket valuationmarket valuations
The market cap to the global GDP ratio can also be calculated instead of the ratio for a specific market. The World Bank releases data on theStock Market Capitalization to GDP for Worldwhich was 92% in 2018.2 This market cap to GDP ratio is impacted by trends in theinitial public of...
To map out the deeper underlying drivers of the post-1980s increases in stock prices and capitalization, we use the dynamic Gordon growth model to decompose the market cap to GDP ratio into three components: the current ratio of listed firms’ dividends to GDP (the profit share channel), fut...
If the ratio approaches 200%--as it did in 1999 and a part of 2000--you are playing with fire. Some people calculate the indicator with the Wilshire 5000 and no adjustment for the market cap ratio (~ $1.15 billionaccording to their web site). Other folks will use a Fed estimate but...
Valuation change: The expected change in value given the current price/earnings (P/E) ratio and the assumption of reversion to the long-term average P/E ratio. Long-term (LT) earnings growth: The estimated rate of the growth of earnings based on the long-term average real GDP per capita...