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Residual Return

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Residual Return
Return independent of the benchmark. The residual return is the return relative to beta times the benchmark return. To be exact, an asset's residual return equals its excess return minus beta times the benchmark excess return.

Residual Return
A return on an investment that is independent of the investment's benchmark. It is calculated as follows:

Residual return = Excess return - (Benchmark's excess return * beta).


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Standard deviation of residual returns of the market model (SDRES): This idiosyncratic risk variable serves as a proxy for the amount of firm-specific information not shared by the market, but in the hands of insiders.
In order to do this, the expected residual losses and expected residual returns of the VIE must be estimated and then allocated to the enterprises that hold variable interests in the VIE.
Fin 46 defines primary beneficiary of a VIE to be the entity which is exposed to the majority of the VIE's expected losses and/of the majority of expected residual returns.
 
 
 
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