How to calculate Market Capitalization to GDP Ratio l How to know that market is undervalued or not?

Definition

The Buffett Indicator is also known as the “Market Capitalization to GDP Ratio”. This ratio helps to assess the entire stock market of a country, not only a single stock. It is similar to price-per-sales ratio, which is used to analyse a single company, but the Buffett Indicator is used to assess all listed companies in an entire country. It is used to learn that the overall market is overvalued or undervalued.

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