The number of publicly traded firms has fallen by nearly 50% (MarketWatch) — The stock market is shrinking! The stock market is shrinking! No, I am not sounding the alarm about the stock market’s recent weakness — though the market did suffer yet another triple-digit decline on Tuesday of this week. I’m instead referring to the shrinking number of publicly traded companies: There barely are half as many today as two decades ago, as the chart above shows. This is an alarming trend to some, and evidence to others that the market must be overvalued. In fact, however, it is neither. If anything, it suggests that the market is undervalued. Consider the Wilshire 5000 index, which “measures the performance of all U.S. equity securities with readily available prices,” according to the Wilshire Associates website. At its membership peak on Jul. 31, 1998, this index had 7,562 members. Today, in contrast, it is below 4,000.