One big reason for the discrepancy is that many of the companies that make up a stock market engage in business overseas.
This chart from JP Morgan highlights just how much of a country’s stock market’s revenues are generated locally.
“Across major developed markets, the domestic share of revenues ranges from an estimated 75% in Japan to 28% in the UK,” JP Morgan analysts note. “Generally, for DM equities investing in fast-growing developing economies, the effect is to boost revenues by as much as 75 bps; the reverse is true for emerging markets.”
Keep this in mind before you bet on a country by betting on its stock market.