Expected value

The weighted average of a probability distribution. Also known as the mean value.

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.

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References in periodicals archive

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And the expected value of 300 cartons is: (0.3 x -150) + (0.5 x 300) + (0.2 x 750) = 255 [pounds sterling].

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The logarithmic function being concave the log of the expected value. is greater than the expected value of the log by half the variance ([sigma].sup.2]):

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According to The Standish Group, only 31 percent of projects delivered 100 percent of their expected value, were on-time and on-budget.

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