Explanation

Option C is correct: The discrepancy is explained by both share buybacks and the issuance of new shares.

How these factors create divergence:

Share buybacks:

• Reduce the number of outstanding shares
• Increase earnings per share (EPS) without actual earnings growth
• Can boost stock prices without corresponding economic growth

Issuance of new shares:

• Increases the number of outstanding shares
• Dilutes existing shareholders' ownership
• Can depress stock prices even when the economy grows

Real-world impact:

• Buybacks can make equity returns appear stronger than underlying economic growth
• New share issuance can make equity returns appear weaker than economic growth
• The net effect depends on which factor dominates in a given period

This explains why stock market performance doesn't always mirror GDP growth.