Question 1 [25 points]
Use the data in the following table (or the data in the attached Excel spreadsheet):
Year S&P 500 Index Dividends Paid S&P 500 Realized Return
1990 330.22 12.09
1991 417.09 12.20 30.00%
1992 435.71 12.39 7.43%
1993 466.45 12.58 9.94%
1994 459.27 13.17 1.28%
1995 615.93 13.79 37.11%
1996 740.74 14.90 22.68%
1997 970.43 15.50 33.10%
1998 1229.23 16.20 28.34%
1999 1469.25 16.69 20.88%
2000 1320.28 16.07 –9.05%
2001 1148.09 15.74 –11.85%
2002 879.82 15.96 –21.98%
2003 1111.91 17.88 28.41%
2004 1211.92 19.01 10.70%
2005 1248.29 22.34 4.84%
2006 1418.30 25.04 15.63%
2007 1468.36 28.14 5.51%
2008 903.25 28.45 –36.55%
2009 1115.10 21.97 25.89%
2010 1257.64 22.65 14.81%
2011 1257.60 26.53 2.11%
2012 1426.19 31.25 15.89%
2013 1848.36 34.90 32.05%
2014 2058.90 39.55 13.53%
2015 2043.94 43.41 1.38%
2016 2238.83 45.70 11.77%
2017 2673.61 48.93 21.61%
2018 2506.85 53.61 –4.23%
2019 3230.78 58.80 31.22%
2020 3756.07 56.70 18.01%
2021 4766.18 59.20 28.47%
3
Prof. Christoph Schiller October 18, 2022
a) What was the average dividend yield for the S&P 500 from 1991–2021?
(Hint: use 𝐷𝑖𝑣𝑡
𝑃𝑡−1
to calculate the annual dividend yield)
b) What was the volatility of the dividend yield?
c) What was the average annual return of the S&P 500 from 1991–2021 excluding dividends (i.e.,
from capital gains only)?
d) What was the volatility of the S&P 500 returns from capital gains?
e) Were dividends or capital gains a more important component of the S&P 500’s average
returns during this period? Which were the more important source of volatility?
Note: Show your work. Do NOT submit only an excel spreadsheet but also clearly write down
your answers to questions (a) through (e).
