Has the Stock Market Become Less Representative of the Economy?

Frederik P. Schlingemann and Rene M. Stulz
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Frederik P. Schlingemann: U of Pittsburgh and European Corporate Governance Institute
Rene M. Stulz: Ohio State U and European Corporate Governance Institute

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: The firms listed on the stock market in aggregate as well as the top market capitalization firm contribute less to total non-farm employment and GDP now than in the 1970s. A major reason for this development is the decline of manufacturing and the growth of the service economy as firms providing services are less likely to be listed on exchanges. We develop quantitative measures of representativeness showing how firms' market capitalizations differ from their contribution to employment and GDP. Representativeness is worst when the market is most highly valued and worsens over time for employment, but not for value added.

JEL-codes: E44 G23 G32 K22 L16 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-fmk and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2020-22

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