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1.2 Country Weights

For the selected list of countries, we determine the weight of each country to ensure the representativeness of the index to capture aggregate private market performance. This begins with mapping out the relative size of private markets in each country.

We use the gross domestic product (GDP) of the 52 countries selected for privateMetrics based on International Monetary Fund (IMF) data. Beginning with the annual nominal GDP values, we perform some adjustments to make the value representative of private markets. The adjustments include:

  • Adjusting the GDP measure to remove the public sector component (i.e., the government).

  • Penalising the GDP measure to reflect investment restrictions on foreign investors imposed in the country.

To arrive at the appropriate penalty, we use the Organisation for Economic Cooperation and Development (OECD) Foreign Direct Investment (FDI) Regulatory Restrictiveness Index. The index measures statutory restrictions on foreign direct investment across 69 countries and sectors. We penalise countries that have an above-average FDI restrictiveness for their time.

The proposed country weights derived by the described approach are provided in Figure 2 from 2013 to 2022 for the top 30 countries. The U.S. consistently receives the maximum weight, reaching a high of 45.9% in 2022, followed by Japan, whose weight over the period has decreased from 15.6% to 7.2%. The top two countries are followed by Germany, the United Kingdom, and France, constituting the top 5 countries by weight.

Note that since index computations are performed in 2023, the 2022 weights are used for the past. However, these weights are expected to be adjusted as the respective data sources are updated. The trends in the figure below illustrate the expected variation in these weights in the future.

image-20240417-071407.png

Proposed Weights of Top 30 Countries in privateMetrics Indices from 2013-2022

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