What is the 'Stock Market Capitalization To GDP Ratio'
The stock market capitalization to GDP ratio is a ratio used to determine whether an overall market is undervalued or overvalued. The ratio can be used to focus on specific markets, such as the U.S. market, or it can be applied to the world market depending on what values are used in the calculation.
Calculated as:
Â
BREAKING DOWN 'Stock Market Capitalization To GDP Ratio'
The result of this calculation is the percentage of GDP that represents stock market value. Typically, a result of greater than 100% is said to show that the market is overvalued, while a value of around 50%, which is near the historical average for the U.S. market, is said to show undervaluation. In recent years, however, determining what percentage level is accurate in showing undervaluation and overvaluation has been hotly debated.
In 2000, according to statistics at the World Bank the market cap to GDP ratio for the U.S. was 153%, a sign of an overvalued market. With the U.S. market falling sharply after the dotcom bubble burst, this ratio may have some predictive value in signaling peaks in the market. However, in 2003, the ratio was around 130%, which was still overvalued but the market went on to produce alltime highs over the next few years.

Ratio Analysis
A ratio analysis is a quantitative analysis of information contained ... 
BookToMarket Ratio
A ratio used to find the value of a company by comparing the ... 
Overvalued
A stock with a current price that is not justified by its earnings ... 
Current Ratio
The current ratio is a liquidity ratio measuring a company's ... 
Operating Ratio
A ratio that shows the efficiency of a company's management by ... 
Combined Ratio
A measure of profitability used by an insurance company to indicate ...

Investing Basics
Finding Solid BuyAndHold Stocks
Find out how to look at the big picture  even when the market's shortterm outlook is less than rosy. 
Saving and Spending
How to Invest Your Excess Cash in Undervalued Securities
Learn how even small investors can shoot for substantial capital gains by starting to invest their excess cash in undervalued securities. 
Active Trading
Don't overemphasize the P/E ratio
These guiding principles will help you avoid common folly during the decisionmaking process. 
Forex
The Price To Earnings Ratio Explained
The price to earnings ratio is one of the most important ratios in investing. Find out how it is calculated, how it can be used and what it tells investors about a particular stock. 
Investing Basics
Analyze Investments Quickly With Ratios
Make informed decisions about your investments with these easy equations. 
Investing
PEG Ratio
Learn more about how this ratio is used to determine a stock's value based on its earnings growth. 
Active Trading Fundamentals
WalMart's 5 Key Financial Ratios (WMT)
Identify the five key financial ratios that fundamental analysts use to evaluate WalMart's financial position and determine if its stock is a good buy. 
Forex Education
How To Use The P/E Ratio And PEG To Tell A Stock's Future
While the pricetoearnings ratio is commonly used for assessing stock prices, the price/earningstogrowth ratio offers forecasting advantages that investors need to know. 
Fundamental Analysis
Efficiency Ratio
There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ... 
Trading Strategies
Financial Ratios to Spot Companies Headed for Bankruptcy
Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.

What is considered a good PEG (price to earnings growth) ratio?
Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio ... Read Answer >> 
Why has the price to sales ratio become a more popular metric than it was in the ...
Explore the usage of the price to sales ratio (P/S), and learn why it has become a more popular equity valuation metric for ... Read Answer >> 
How exactly do I use the price to sales ratio to evaluate a stock?
Learn the best way for investors and market analysts to make use of the price to sales ratio in evaluating a company's stock. Read Answer >> 
What role does ratio analysis play in valuing a company?
Learn about the role of ratio analysis in determining company value, including some of the most common ratios used by modern ... Read Answer >> 
How do I use the PEG (price to earnings growth) ratio to determine whether a stock ...
Using the PEG, or price/earnings to growth, ratio provides a better picture of a stock's valuation versus simply relying ... Read Answer >> 
Why is the PEG (price to earnings growth) ratio something I should be looking at ...
Understand the price/earnings to growth ratio and why it may be a better stock valuation tool than the more widely used priceearnings ... Read Answer >>