Dhaka, June 20 -- One of the more intriguing facts in modern economics is that the value of the United States (US) stock market substantially exceeds the country's annual Gross Domestic Product (GDP), while in many other nations' stock market capitalisations and GDPs are roughly equal. At first glance, this appears paradoxical. How can the value of listed companies exceed the value of everything produced in a year?

The answer lies in the fundamental difference between what GDP measures and what stock markets value. GDP is an annual flow of goods and services produced within a country's borders during a single year. Stock market capitalisation, by contrast, is a stock measure representing the discounted present value of expected future pr...