Each stock's rate of return in a given year consists of a dividend yield (which might be zero)plus a capital gains yield (which could be positive,negative,or zero).Such returns are calculated for all the stocks in the S&P 500.
-A simple average of those returns (which gives equal weight to each company in the S&P 500)is then calculated.That average is called "the return on the S&P Index," and it is often used as an indicator of the "return on the market."

Question

Quizplus · Accepted Answer

The return on the S&P 500 Index is typically calculated as a market-value-weighted average, not a simple average, which means each company's return is weighted by its market capitalization, not given equal weight.

Each Stock's Rate of Return in a Given Year Consists