Lootman wrote:Even so, where the changes in rankings are large then I'm not sure it can be completely explained away by what you are saying.
Well, the changes in ranking of China in the EM index with no difference in relative returns, as shown in the Schroders article referenced earlier, were pretty large by any measure!
But, of course, there's no one factor that can
completely explain the matter, and I never claimed any did. What I said was that relative returns can't
necessarily be inferred from changes in rankings (or vice-versa).
There are clearly a number of factors, organic growth (returns), accretion and, as you say, dividends etc, that will be at play simultaneously and in varying degrees.
If you'd care to find the necessary data and do an attribution analysis I'm sure readers would be most interested ... please do show your workings.
Failing that, I suspect that between countries with well established markets, e.g. the FTSE Developed World index, that organic growth (returns) would be the major factor, as those have (relatively) little in the way of accretion, and I'd agree that'd be the case for the Japanese boom-bust 30 years ago you're citing.
However, for the global view in more recent times I'm much less sure that's the case and I think that going forward accretion will become
the major factor, and the idea that changes in rankings reflect relative returns will become much more unreliable (if it isn't already).
There's some interesting charts at
https://seekingalpha.com/article/4205959-3-charts-emerging-vs-developed-market-equity-allocations, where it points out that:
"
Though EM economies account for more than 55% of global GDP, EM equities account for less than 15% of world equity market cap." [Sep 2018]
Methinks there's likely to be awful lot of accretion in the coming years!