The 2008 Revision to Market Value of The 2008 Revision to Market Value of Quoted and Unquoted Shares of Quoted and Unquoted Shares of

Corporate Equities in the U. S. Flow of Corporate Equities in the U. S. Flow of Funds AccountsFunds Accounts

Prepared by Susan Hume McIntosh and Elizabeth Ball Holmquist

Working Party on Financial StatisticsNovember 2, 2009OECD, Paris

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Relative Importance of Unquoted Relative Importance of Unquoted SharesShares

Revision to Market Value of Corporate Equities

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Previous Methodand the Upward Revision

Last benchmark 2000:Q4, perpetual inventory method equation using DJ Total Market Index and net equity issuance

Use Wilshire 5000, adds over $600 billion Net change in shares outstanding Closely held benchmarked to estate tax return data, moved by

index Shift to larger proportion of closely held shares

Upward revision of

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Publicly Traded FirmsNew Method

Gross market value=share prices x shares outstanding using firm-level data from CRSP

ADRs and listed companies incorporated outside U.S. are excluded

Preferred stocks benchmarked to data from Standard and Poor’s for 2007:Q1

Intercorporate holdings of nonfinancial companies excluded using Compustat data

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Closely Held FirmsS-corpoations - 1

For 2006, 3.8 million returns, $3.0 trillion in assets, $851 billion in net worth

65% of market value of closely held firms Uses aggregate net worth from IRS Statistics of

Income (SOI) tax data with 2 year lag 14 industry classifications Average historical growth rates by industry of net

worth used for most recent periods Annual net worth converted to quarterly using

linear interpolation6

Closely Held FirmsS-corpoations - 2

Calculate ratio of summed market value to summed net worth for public companies, by industry, quarterly from Compustat data

S-corps market value = S-corps net worth x market-to-net worth ratio of public companies

Sum S-corps market values of 14 industries Latest periods use Russell 2000 index Downward liquidity adjustment of 25%

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Closely held firmsC-corporations - 1

35% of market value of closely held firms List of private C-corps with revenue greater than

$1 billion from Forbes For 2008, 441 private C-corps Information available from Forbes includes

revenue, industry classification, and number of employees

Annual revenue held constant for each quarter of the year

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Closely held firmsC-corporations - 2

Match each private C-corp with a public firm that has a similar industry and revenue profile using Compustat data

Compute market value-to-revenue ratio for all comparable public companies

Market value of private C-corps = revenue of private C-corps x market-to-revenue ratio of public companies

Use DJ total market index for latest quarters Downward liquidity adjustment of 25%

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Market Value of Corporate Equities in the U.S.

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