Abstract
In this paper, we discuss the relationship between the level of economic development and the size of the stock market relative to the total economic output. We find a positive relationship and statistically significant regression coefficients between gross national income per capita and total stock market capitalization to gross national income for each year from 1994 to 2003 for between seventy-eight and one hundred and two countries. A well developed stock market facilitates capital allocation in an economy which is necessary for economic growth and development and provides the large pools of funds to successful entrepreneurs needed for corporate growth.
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