Ex ante return


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Ex ante return

The expected return or anticipation return of an asset or portfolio.

Expected Return

The return on an investment as estimated by an asset pricing model. It is calculated by taking the average of the probability distribution of all possible returns. For example, a model might state that an investment has a 10% chance of a 100% return and a 90% chance of a 50% return. The expected return is calculated as:

Expected Return = 0.1(1) + 0.9(0.5) = 0.55 = 55%.

It is important to note that there is no guarantee that the expected rate of return and the actual return will be the same. See also: Abnormal return.
References in periodicals archive ?
To specify the demand for M2+, they correctly recognize the importance of specifying the ex ante return on its close substitutes - real assets such as commodities and durable goods, as well as financial assets such as direct holdings of short-term instruments, bonds and stocks.
Even if we leave the interpolation problem aside, the usefulness of M2+ as a long-run indicator also would be limited: For the demand for M2+ to be properly specified, one would need to specify ex ante returns - a task bordering on the impossible, as the authors of both papers seem to acknowledge.
First, the ex ante return to starting college for male high school graduates is higher than the ex post return to the first year of college because starting college provides the option to continue.
Joseph Hotz, and Arnaud Maurel, Duke University and NBER; and Teresa Romano, Duke University, "Recovering Ex Ante Returns and Preferences for Occupations Using Subjective Expectations Data"
The estimated demand functions posit direct holdings of Treasury bonds and bills as the sole substitutes for M2+ because of difficulties in finding plausible measures of expected ex ante returns on real assets and equities.
In particular, proxies are needed for the ex ante returns on mutual funds.
Proxies for ex ante returns on bond and stock funds are examined immediately below.