Introduction

Abstract

World financial markets have witnessed dramatic changes over the last twenty years. Three significant developments must be recognized: First, international markets have grown considerably in size. In terms of U.S. dollars, the capitalization of the world stock market increased from approximately 890 billion at the end of 1974 to over 13′200 billion in March 1995. Likewise, the nominal value of debt outstanding on international bond markets expanded rapidly to over 18’000 billion U.S. dollars at the end of 1994. - Secondly, as regards structure international markets have experienced a great deal of alteration. In particular, the composition of world equity capital has changed. The world market share of the United States stock market decreased from about 57 per cent in the mid-seventies to about 38 per cent in the mid-nineties. At the same time, the weight of European common stocks in the world market grew moderately from 22 per cent to around 26 per cent. The Japanese stock market, most notably, contributed to the rapid growth of global equity capitalization; this country’s world market share increased from about 13 per cent in the mid-seventies to 27 per cent in March 1995. In recent years, several new equity markets have emerged and developed in Latin America, Europe, Asia, Africa, and the Middle East. Today these markets account for roughly 10 per cent of the world equity capitalization.¹ - Thirdly, over the most recent decade, barriers to international investment have decreased notably. Because of improvements in technology, continuous liberalization of capital controls in many countries, and increasing globalization of financial services, almost every financial market around the world has become accessible to investment capital.