Ex ante return
Ex ante return
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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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