Answer: both share buybacks and the issuance of new shares.

## 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.

Author: LeetQuiz Editorial Team