14  BIS central bankers’ speeches  Chart 7 Projected global GDP shares (2000–2050) 2000  2010  China  India  China  India  Other emerging G20  US  Other emerging G20  US  Other advanced G20  Non-G20  Other advanced G20  Non-G20  2020  2030  China  India  Other emerging G20  US  Other advanced G20  Non-G20  China  India  Other emerging G20  US  Other advanced G20  Non-G20  2040  2050  China  India  China  India  Other emerging G20  US  Other emerging G20  US  Other advanced G20  Non-G20  Other advanced G20  Non-G20  Source: IMF, US Census Bureau, Penn World Tables and Bank calculations. See Haldane (2010) for more details. Measured at market exchange rates. e  BIS central bankers’ speeches  15  Chart 8  Chart 9  Equity home bias to GDP per capita in 2005  Equity financial depth versus log GDP per capita in 2005 for G20 economies  Source: IMF International Financial Statistics, IMF World Economic Outlook October 2010, S&P Global Stock Markets Factbook (2010), updated and extended version of dataset constructed by Lane and Milesi-Ferretti (2007) and Bank calculations. Source: IMF World Economic Outlook and Thomson Reuters Datastream.
Home bias is measured here as an index lying between zero and one.2 So a value of unity indicates complete home bias – that is, a country holds no foreign equity in its investment portfolio. A value of zero, meanwhile, suggests home bias has been completely eliminated, with a country investing in proportion to the world market portfolio. Intermediate values tell us the proportion a country is underweight foreign assets relative to a world portfolio benchmark. The following points are noteworthy:   Equity home bias remains very significant across every country in the world. The unweighted average home bias across the G20 in 2007 was around 0.78. Weighted by market capitalisation, average home bias was 0.66. So, in weighted terms, G20 countries’ holdings of foreign equity are around a third of the value they would be in the theoretically optimum market portfolio.   This home bias is lower among advanced than emerging market economies. The un-weighted home bias index in 2007 was 0.63 for advanced countries, while for emerging market G20 economies it was 0.90. For those emerging economies which maintain capital restrictions, such as India and China, home bias remains almost complete.   On average, there has been a decline in equity home bias across G20 countries over time. Among advanced G20 economies, the un-weighted home bias index has fallen from 0.75 in 1995 to 0.63 in 2007. Weighted by market capitalisation, it has fallen from 0.79 to 0.61 over the same period.