Why do financial news focus on price return indexes instead of total return indexes?

Question

On television, in newspapers, and in online financial news portals, price return indexes get featured prominently. News reports regularly mention how much a particular index has risen or fallen over some duration, and the index used is almost always a price return index instead of a total return index (e.g. S&P 500 price return [SPX] instead of S&P 500 total return [SPXT]). For investors, isn't the total return more relevant than the price return, since the total return includes returns from dividends? In financial news, why is there such a large focus on price return indexes instead of total return indexes?

Answer 1

The news organizations use a simple method of expressing what happened on Wall street today: Dow, S&P 500, and NASDAQ.

An all news radio station where I live gives these numbers 4 times an hour. For the average person that tells them everything they think they need to know about what is happening in the stock market.

Most don't understand what they mean or what they represent but if they go up that means good news, if they go down that is bad news. The numbers seem to react to the financial news (interest rates), Oil prices, inflation, the housing market, unemployment, and major news events.

For investors, isn't the total return more relevant than the price return, since the total return includes returns from dividends? In financial news, why is there such a large focus on price return indexes instead of total return indexes?

Only a small subset of adults care about the difference. The news organizations want a 30 second sound bite, that seems to keep people informed.

In the United States even if they do invest, most people do so via their 401(k) or their IRA. They have no reason to track the different indexes. They have no need for a daily accounting of their investments.

The subset of people that do need to know the difference are using different news sources to track the performance of their investments.

Answer 2

I agree with you that return indices are more relevant than price indices for most investors, especially in the long term.

Yet, while most price indices are calculated and disseminated quite frequently during the trading hours, most return indices are calculated and disseminated only once a day and after the markets are closed. This is described, for example, by the S&P U.S. Indices Methodology document (also available on this web page on S&P 500 by S&P Dow Jones Indices) as follows:

Gross Total Return (TR) versions reinvest regular cash dividends at the close on the ex-date without consideration for withholding taxes.

Net Total Return (NTR) versions, if available, reinvest regular cash dividends at the close on the ex-date after the deduction of applicable withholding taxes.

As the news organizations are able to report only the price versions of most indices during the day, they usually continue to report the price indices and the changes in the price indices even after the markets are closed in order not to confuse their readers or viewers.