Developed markets differ from emerging markets in two ways. First, the overall size of the emerging market economies is much smaller in terms of GDP relative to developed markets. Hoyer-Ellefsen (2004) shows that the GDP of developed markets is more than six times larger. Secondly, the size of the financial markets of emerging markets in relation to their economies as a whole is much smaller. Pereiro (2001) compares the size of the stock market to the GNP and finds that the importance of the stock markets in emerging markets in relation to the markets economy is small. Levine (1997) shows that citizens of the poorest countries (bottom 25% on the basis of income per capita) held just one-third of the yearly income in formal financial intermediaries, compared to two-third of their yearly income when considering citizens of the richest countries (top 25% on the basis of income per capita). Although, developed and emerging markets seem to display a similar number of listed firms, the market capitalization of the listing for developed markets is noticeably larger than that of emerging markets (Hoyer-Ellefsen, 2004).
