Core Insights - The article discusses the performance of stock investments in relation to reference rates and risk premiums, highlighting that a stock's performance can underperform the reference rate significantly when dividends are considered [1][2]. Group 1: Investment Performance Metrics - The stock underperformed the reference rate by 13% when including a 2% dividend, resulting in a negative equity risk premium of 15% [1]. - Risk premiums can be either positive or negative, reflecting the uncertainty and potential for losses associated with risky assets like stocks [2]. Group 2: Index Return Types - The article outlines three main components that contribute to an index's return profile: price changes, periodic income, and risk premiums [3][5]. - Four primary types of index returns are defined: Price Return (PR), Total Return (TR), Net Total Return (NTR), and Excess Return (ER), each providing a unique perspective on index performance [4]. - The Total Return Index includes all return components, while the Price Return Index focuses solely on price changes, excluding periodic income [6][8]. Group 3: Index Construction and Use Cases - Nasdaq can create different types of indexes based on the desired return profile, including Price Return Index, Total Return Index, and Excess Return Index [6][7]. - The relationship between the reference rate and periodic income is crucial for understanding index performance and its applications in financial products [5][10]. - Funded and unfunded indexes are differentiated based on whether the underlying assets are purchased upfront, affecting the exposure to the reference rate [9].