As regards _institutional investors’ size_ , all indicators are based on the share of financial assets to GDP. Surprisingly, coverage is very uneven. While it is generally good for OECD countries, for other countries it is very spotty, particularly in the case of pension funds. However, by putting together data from a variety of sources, including data collected during FSAPs, we obtained a data set with reasonable coverage as regards the number of countries (103) albeit fairly limited in time (only one year for about half the sample).

In the case of _equity market size_ indicators, the pre-selected FDIs (all divided by GDP) included: i) market capitalization; ii) value traded; and iii) new issues. Market cap has the advantage of being more directly comparable to bank credit (both are stock variables); yet it is not robustly associated with cross-country variations in economic growth, possibly because it does not provide a good proxy of underlying market activity (some markets have large listings that never trade). Further, market cap does not reflect actual funding for companies, but rather the discounted expected future returns of shareholders, which may fluctuate widely over time. Hence value traded and new issues were also preselected because they are flow variables that better reflect primary and secondary market activity. The new issues indicator, on the other hand, has the shortcoming that numbers might vary significantly over the years, especially in small markets.

As regards _equity market efficiency/liquidity_ , two indicators were pre-selected: i) turnover; and ii) price synchronicity. Turnover (value traded over market cap) has the advantage of a much broader coverage. However, it is a measure of market liquidity rather than market efficiency (while one would expect close correlations between the two, they are conceptually distinct). Price synchronicity (i.e., the extent to which all equity prices co-vary) is a more direct measure of market efficiency (in efficient markets, idiosyncratic information on individual prices should result in less synchronicity). However, it is much more information-intensive (hence prone to coverage limitations) and could be substantially affected by macroeconomic conditions.

The set of potential equity market reach indicators was narrowed down to three: i) number of listed firms, divided by population;<sup>21</sup> ii) percent of total market capitalization accounted for by the 10 largest firms; and iii) percent of market capitalization accounted for by closely held shares. The first indicator measures reach in terms of breadth of use and could also be interpreted as a size indicator;<sup>22</sup> the last two are more closely related to measures of market concentration. For the listed-firms indicator, coverage is quite good (across both time and countries).

Finally, as regards _bonds market size_ indicators, the best available information (the stock of public and private bond issues, divided by GDP) comes from Bank of International Settlements (BIS). However, coverage is low (about 40 countries and 15 years of data). A flow indicator for new private bonds (new corporate issues) is also available. To reflect _bond market liquidity (and efficiency)_ , information on private and public bonds turnover

> 21 Should reliable information be available, the total number of firms (rather than the number of people)

> would be a better deflator.

> 22  However, the correlation of listed firms with market capitalization is rather low (see Table 4).

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