Stock market development and
            financial intermediaries : stylized facts
World stock markets are booming.
            Between 1982 and 1993, stock market capitalization grew from
            $2 trillion to $10 trillion, an average 15 percent a year.
            A disproportionate amount of this growth was in emerging
            stock markets, which rose from 3 percent of world stock
            markets capitalization to 14 percent in the same period.
            Yet there is little empirical evidence about how important
            stock markets are to long-term economic development.
            Economists have neither a common concept nor a common
            measure of stock market development, so we know little about
            how stock market development affects the rest of the
            financial system or how corporations finance themselves.
            The authors collected and compared many different indicators
            of stock market development using data on 41 countries from
            1986 to 1993.  Each indicator has statistical and conceptual
            shortcomings, so they used different measures of stock
            market size, liquidity, concentration, and volatility, of
            institutional development, and of international integration.
            Their goal: to summarize infromation about a variety of
            indicators for stock market development, in order to
            facilitate research into the links between stock markets,
            economic development, and corporate financing decisions.
            They highlight certain important correlations: (i) In the 41
            countries they studied, there are enormous cross-country
            differences in the level of stock market development for
            each indicator.  The ratio of market capitalization to the
            gross domestic product (GDP), for example, is greater than 1
            in five countries and less than 0.10 in five others. (ii)
            There are intuitively appealing correlations among
            indicators.  For example, big markets tend to be less
            volatile, more liquid, and less concentrated in a few
            stocks.  Internationally integrated markets tend to be less
            volatile. And institutionally developed markets tend to be
            large and liquid.  (iii) The three most developed markets
            are in Japan, the United Kingdom, and the United States.
            The most underdeveloped markets are in Colombia, Nigeria,
            Venezuela, and Zimbabwe.  Malaysia, the Republic of Korea,
            and Switzerland seem to have highly developed stock market,
            whereas Argentina, Greece, Pakistan and Turkey have
            underdeveloped in richer countries, but many markets
            commonly labeled "emerging" (for example, in
            Korea, Malaysia, and Thailand) are systematically more
            developed than markets commonly labeled
            "developed" (for example, in Australia, Canada,
            and many European countries). (iv) Between 1986 and 1993,
            some markets developed rapidly in size, liquidity, and
            international integration.  Indonesia, Portugal, Turkey, and
            Venezuela experienced explosive development, for example.
            Case studies on the reasons for (and economic consequences
            of) this rapid development could yield valuable insights.
            (v) The level of stock market development is highly
            correlated with the development of banks, nonbank financial
            institutions (finance companies, mutual funds, brokerage
            houses), insurance companies, and private pension funds.