STOCK MARKET CAPITALIZATION TO GDP RATIO
This is the ratio used to determine if the market is undervalued or overvalued. This ratio can be used to determine evaluation of any particular market, as well as the market overall.
Stock market capitalization to GDP ratio is being calculated by inputting the data of stock market capitalization over (the particular) market GDP. The SMC to GTP ratio itself is this number times a hundred:
This means that MC to GDP is a percentage of stock market value’s GDP. If the result is greater than 100%, it is an overvalued market, and if the result is around 50%, that is an undervalued market. Just for illustration, according to the World Bank, the US market capitalization to GDP ratio was 150% in 2000, which was an overvalued market.