Thursday, February 17, 2011

How important is the stock market?

Felix Salmon recently posted an op ed in the New York Times that argues that the US equity markets are becoming less important to the US economy.

The striking number is that in 1997 there were 7,000 publicly traded firms.  Today there are 4,000.  The number of IPOs is way down and the market is increasingly becoming dominated by large cap stocks.  Furthermore, these stocks rarely use the market to raise new equity.  Many small firms that would have listed on the markets are now being funded with private equity.

Felix follows up on his original column and asks what this means for small investors.