The outperformance of the US equity market over the European market is an illusion created by share buybacks

The US stock market index has outperformed its euro-zone counterpart hugely. But we show that this is an illusion caused by share buybacks in the United States. A stock market index represents the value of companies per share: when the number of shares falls, automatically the index rises. Now, the number of shares has fallen in the United States under the effect of share buybacks, whereas it has risen in the euro zone. When we adjust the stock market indices for the number of shares, we find that the adjusted Euro Stoxx has risen as much as the adjusted S&P since 1998.