Equity Index Construction and Research on Wealth Gap by Xiaohuang Zhu & Song Lin

Author:Xiaohuang Zhu & Song Lin
Language: eng
Format: epub
ISBN: 9789811395543
Publisher: Springer Singapore

4.3.5 Selection of Indicator Data

This section is mainly dedicated to selecting indicators for constructing the financial equality index based on the above analysis, and discussing the feasibility of data based on the data collection channels.

Financial Scale Factor

In order to facilitate data comparison, all of the financial scale factor indicators are selected based on Goldsmith’s views concerning the financial interrelations ratio, so they are ratios of the scale of relevant financial resources to the GDP of that year. Specifically, the selected indicators include the ratio of M2 to GDP, the ratio of the deposit-loan balance of financial institutions to GDP, the ratio of stock market securitization (stock market value) to GDP, the ratio of balance of bonds to GDP, and the ratio of aggregate financing to GDP. These indicators respectively represent the ratios of monetary funds, bank deposits and loans, stock market value, balance of bonds, and aggregate financing to the GDP, respectively, of the same year. They measure both the main types of the financial scale factor and the overall financial scale factor, like aggregate financing. Considering the availability and the length of the time for this series of data, the ratio of stock market securitization to GDP and the ratio of balance of bonds to GDP from 1991 to 2014 are selected as indicators.

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