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Sizing Up the Investment World

I recently sent out a survey asking questions about the size of publicly traded stock markets in various countries throughout the world. As you'll see, it was a bit of a trick question. Let's look at China and Japan to see why.

According to the World Bank, the gross domestic product of China is the second largest in the world. China's GDP is about one-third larger than Japan's. But when you look at the market capitalization of their publicly traded stocks, Japan's is three times larger than China's.

The reason for this apparent anomaly is pretty straightforward. GDP measures the economic output of a country. China's GDP has risen rapidly over the years. But most of China's output is from privately-owned businesses and government-run entities. So the amount of stocks that can be bought and sold by the public is relatively small -- only 1% of the world's market capitalization. Publicly traded stocks in Japan meanwhile constitute 8% of the world's market capitalization.

With that in mind, the answers to our recent survey follow.

The United States has a market capitalization of $22 trillion, which comprises 49% of the world's publicly traded stocks. (The U.S. also has the largest GDP -- twice that of China's.) This highlights both the incredible size of the U.S. economy as well as the fact that there is a large investment world out there.

The market capitalization of various countries, as well as Apple, is:

Japan     $3.43 trillion
France    $1.42 trillion
China     $1.02 trillion
Apple     $501 billion
Brazil     $491 billion
Mexico   $252 billion

Most people overestimated China and underestimated France, but realized that Apple was larger than Brazil and Mexico. In fact, Apple's market capitalization is larger than that of most countries.

Finally, while China and Japan have the two largest GDPs after the United States, when it comes to the market capitalization of publicly traded companies, the next two largest after the U.S. is Japan and the United Kingdom. Most people chose China and Japan.

Words of Wisdom

Is' a small world, but I wouldn't want to paint it.
-- Steven Wright (again)