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Journal Article

The Big Bang: Stock Market Capitalization in the Long Run

Journal of Financial Economics, 145 (2): 527-552.

Authors

  • Kuvshinov
  • D.
  • Zimmermann
  • K.

Publication Date

JEL Classification

E44 G10 N20 O16

Key Words

Stock market capitalization

Equity issuance

Corporate profits

Wealth-to-income ratios

Long-run trends

We study trends and drivers of long-run stock market growth in 17 advanced economies. Between 1870 and the 1980s, stock market capitalization grew in line with GDP. But over subsequent decades, an unprecedented expansion saw market cap to GDP ratios triple and remain persistently high. While most historical stock market growth was driven by issuances, this recent expansion was fueled by rising equity prices. We show that the key driver of this structural break was a profit shift towards listed firms, with listed firm profit shares in both GDP and capital income doubling to reach their highest levels in 146 years.

Kiel Institute Expert

  • Prof. Dr. Kaspar Zimmermann
    Research Director

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