Understanding Buffett Indicators in Different Industries

Keyuan Wu

Chapter 26 in Business Analytics:Progress on Applications in Asia Pacific, 2016, pp 685-710 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Buffett Indicator (BI) is the ratio of Market Capitalization to Gross Domestic Product (GDP) in the United States of America. In 2015, the Buffett Indicator reached over 130 per cent, indicating a potentially bad time to invest. In this study, the concept of the Buffett Indicator is extended to individual industries and calculated based on published datasets for Industry Market Capitalization and industry GDP. The historical data shows the average Buffett Indicator from 1970 to 2014 was less than 50 per cent for industries such as Agriculture, Construction, Wholesale Trade, and Services. Mining, Utilities, Manufacturing and Information are popular industries for investors and got their Buffett Indicators greater than 150 per cent. Regression analysis shows that the Buffet Indicators for Mining, Utilities, Manufacturing, Information, Finance, and Services significantly affect the trend for the entire set of industries.

Keywords: Business Analytics; Entrepreneurship; Big Data; Information Technology (search for similar items in EconPapers)
JEL-codes: L26 (search for similar items in EconPapers)
Date: 2016
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