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Understanding Buffett Indicators in Different Industries

In: Business Analytics Progress on Applications in Asia Pacific

Author

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  • Keyuan WU

Abstract

Buffett Indicator (BI) is the ratio of Market Capitalization to Gross Domestic Product (GDP) in the United States of America. In 2015, the Buffett Indicator reached over 130 per cent, indicating a potentially bad time to invest. In this study, the concept of the Buffett Indicator is extended to individual industries and calculated based on published datasets for Industry Market Capitalization and industry GDP. The historical data shows the average Buffett Indicator from 1970 to 2014 was less than 50 per cent for industries such as Agriculture, Construction, Wholesale Trade, and Services. Mining, Utilities, Manufacturing and Information are popular industries for investors and got their Buffett Indicators greater than 150 per cent. Regression analysis shows that the Buffet Indicators for Mining, Utilities, Manufacturing, Information, Finance, and Services significantly affect the trend for the entire set of industries.

Suggested Citation

  • Keyuan WU, 2016. "Understanding Buffett Indicators in Different Industries," World Scientific Book Chapters, in: Jorge L C Sanz (ed.), Business Analytics Progress on Applications in Asia Pacific, chapter 26, pages 685-710, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813149311_0026
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    More about this item

    Keywords

    Business Analytics; Entrepreneurship; Big Data; Information Technology;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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