- We consider five components of stock market return: Inflation, dividend yield, real book-value growth, share dilution and the “Dream Factor”
- The “Dream Factor” could be thought of as the residual, the part of the market return that can’t be explained by the other four fundamental factors
- “Dream Factor” is the portion of return driven only by re-rating of multiples
- During bull markets, the “Dream Factor” is generally high but usually negative in bull markets and market crashes
- Overall in Asia, on average during 2004-2016 (including the global financial crisis in 2008-2009) the “Dream Factor” did not contribute to return
- In the two highest returning markets Indonesia and the Philippines, the “Dream Factor” contribution was also the highest
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