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The Stock and Price 500 Total Return Index is a ranking system that observes the trading of dividends for a selected number of companies. These companies are 500 in number. The dividends returns that accumulate from the 500 companies are reinvested into purchasing more stock. One thing that sets apart the two indices is the impact that they have. According to the Indexology Blog (2011) on S&Ps on the Dow Jones Index, these 500 companies cumulatively can significantly influence stocks (Chou, Chou, & Ko, 2009).

Wachter, (2013) defines equity premium as the excessive returns, which are accrued after investment in the stock market. This is usually after a period of trading that has been free of risk that may arise from rates from the trade of bonds issued by the national treasury. It thus possible to take expected return as the sum of dividend yield and growth in dividends
Assuming an expected market return of 2.0%, and real stock return of 3.5% then the equity premium will be calculated as;
Step
Step Estimate
Real stock return 3.5
Subtract real bond returns 2.0
Estimated equity premium =1.5%

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