tries in which investors can accumulate wealth. At the end of World War
II, U.S. stocks comprised almost 90 percent of the world’s equity capital-
ization; in 1970, they still comprised two-thirds. But today, the U.S. mar-
ket constitutes considerably less than half of the world’s stock value, and
that fraction is shrinking. To invest only in the United States is to ignore
the majority of the world’s equity capital.
THE WORLD’S POPULATION, PRODUCTION, AND EQUITY CAPITAL
Despite the growth abroad, the equity markets are still heavily repre-
sented by the developed countries in the world.^2 The lopsidedness of the
world economy is illustrated in Figures 10-1a through 10-1c. The devel-
oped world contains less than 15 percent of the world’s population. Yet
it produces over 50 percent of the world’s goods and headquarters over
93 percent of the world’s equity capital.^3
162 PART 2 Valuation, Style Investing, and Global Markets
FIGURE 10–1a
The 2005 World Population(^2) North America (the United States and Canada); Western Europe; Japan; Australia and New
Zealand; Singapore, South Korea, and Taiwan; and Hong Kong.
(^3) The equity capital is based on the free float shares, and for China only those shares issued in Hong
Kong.