The reason stock market investments are not included in the calculation of Gross Domestic Product (GDP) can be understood through a couple of key points:
a) Stock prices fluctuate daily and a true value is hard to determine: The stock market is often volatile, with prices changing based on a variety of factors including investor sentiment, economic indicators, and global events. These fluctuations can lead to significant instability in the perceived value of companies over short periods. Since GDP aims to measure the economic output of a country at a given time, including assets whose values can change drastically would not provide a stable or reliable measure of economic activity.
b) Owning stocks does not contribute to our country’s production: GDP is concerned with the value generated from the production of goods and services within an economy. Buying and selling stocks does not create new goods or services; rather, it involves the transfer of ownership of existing assets. Thus, while stock trading represents monetary transactions, it does not reflect the actual economic output or productivity of a nation. This is why GDP focuses on metrics like consumption, investment in physical goods, government spending, and net exports instead.