How do you calculate the 'market return' (also known as market index)?

Question

I'm trying to calculate a cost of equity but need a market rate to do so!

Answer 1

To calculate any rate of returns, just take the profit and divide it over the original amount.
For e.g. If you buy an investment at $1.00 and it went up to $1.05. The profit is $0.05. Take $0.05 and divide it over $1.00. You would get 0.05. That's a 5% return.
Hope this answers your question!

Answer 2

Are you referring to an individual stock, index, asset class, or the entire world? Figure out the price of the 'market index' as of Jan 1, 2006. Then write down the price as of Dec 31, 2006. Subtract the Jan 1, 2006 price from the Dec 31, 2006 price. This number is your earnings for the year. Then divide the earnings by the Dec 31, 2006 price and that will give you the annual rate of return.