net return versus gross return
I understand what those terms mean, however I am puzzled by why they are so different in value, for example: EURO STOXX 50, the net return is quoted at: 6979.38, while the gross return version is quoted at: 1,344.57
If both indices reflect full capital reinvestment, how come the net return has much higher nominal value?
Both must have started at 1000 points at the same time, if anything, I would have expected the gross return to be higher, because it does not reflect deduction of taxes
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Both must have started at 1000 points at the same time
This is not true. Looking at the history of both, the Gross Return index goes back to Jan 1, 2001, where it had a closing value of 988, while closing value of the Net return index on that date was 5,957.
As with most indices, the value is relative only to its starting date and value. You cannot directly compare indices which have different calculation methods or start on different dates. Instead, you should compare their return over a given period.
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