Can You Use the McDonald’s ‘Big Mac Index’ To Invest — and Should You?
Written by
John Csiszar
Edited by
Jenna Klaverweiden
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The “Big Mac Index” was created in the 1980s by economists looking to evaluate the relative levels of affordability among various countries and currencies. The idea was that McDonald’s Big Mac was available in numerous countries around the world and stood as a good example of a relatively cheap meal.
The theory behind the Big Mac Index is that the popular McDonald’s sandwich should have the same approximate level of affordability on a local basis from country to country. In other words, if a Big Mac sandwich costs $5 in the United States, it should cost the same amount as $5 in the local currency of whatever country you choose.
To calculate the Big Mac Index, you can take the price of a Big Mac in one country and divide it by the cost in another country. This ratio should be the same as the exchange rate between the two countries. If not, it means that one currency is undervalued relative to the other.
While obviously a bit tongue-in-cheek in terms of its name and methodology, the Big Mac Index does have value in terms of evaluating the purchasing power of various countries. But is this something that relates to the average investor, and if so, how can you use it? Read on to learn more about this curious index.
Also see five investing tips to combat a confusing economy.
Example of a Big Mac Index Calculation
The idea behind the Big Mac Index is the law of one price. Theoretically, all other things being equal, the price of a Big Mac should be the same worldwide, after factoring in currency fluctuations, shipping and transport costs, labor, and so on. However, while the price of a Big Mac is fairly similar on an adjusted basis across all countries, there are variations that will always make it more expensive in some countries than others.
For example, in 2024, Switzerland had the most expensive Big Mac in the world, at an equivalent of $8.07 in U.S. dollars, according to Statista. A Big Mac in the United States cost an average of $5.69. (These figures are after adjustments for currency fluctuations.)
In January 2025, The Economist provided a more direct example, citing a price of 4.59 pounds for a Big Mac in Britain and $5.79 in the United States. This implied an exchange rate of 0.79, whereas the actual exchange rate between the USD and GBP was closer to 0.8. In this example, the price of the Big Mac was essentially where it “should be” in each country, as the prices were comparable based on the exchange rate. Technically, however, the GBP was slightly undervalued.
How Does the Big Mac Index Affect Individual Investors?
The Big Mac Index affects individual investors who buy or sell foreign currencies or foreign securities, like stocks or bonds. In these cases, investors can use the Big Mac Index to derive whether or not a foreign currency is overvalued or undervalued.
When a foreign currency is undervalued, buying securities with U.S. dollars provides more of a value. The opposite is also true. Buying foreign stocks, bonds or currencies when the exchange rate is working against a U.S. investor, such as when the Big Mac Index says a currency is overvalued, can make investing more difficult and less profitable.
For the average U.S. investor, the Big Mac Index is more of a curiosity than a real investment tool. In fact, it may have more value for an American looking to travel overseas, as it can suggest which countries have undervalued currencies relative to the U.S. dollar. But the Big Mac Index can be a data point if you intend to invest in foreign currencies, stocks or bonds.
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