Expected Return

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Expected return

The expected return on a risky asset, given a probability distribution for the possible rates of return. Expected return equals some risk-free rate (generally the prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference between the historic market return, based upon a well diversified index such as the S&P 500 and the historic U.S. Treasury bond) multiplied by the asset's beta. The conditional expected return varies through time as a function of current market information.

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

The expected return is used to figure the taxable portion of pension that is taxed under the general rule. For a lifetime pension, it is computed by multiplying the annual pension by the applicable expected life multiple from government actuarial tables.
References in classic literature ?
But his spirits were soon rising again, and with laughing eyes, after mentioning the expected return of the Campbells, he named the name of Dixon.Emma blushed, and forbade its being pronounced in her hearing.
And therefore, when all Paris was rejoicing in the expected return of the king, appointed for the next day, Gondy alone, in the midst of the general happiness, was dissatisfied; he sent for the two men whom he was wont to summon when in especially bad humor.
Spenlow remarked, on this occasion, when we concluded our business, that he should have been happy to have seen me at his house at Norwood to celebrate our becoming connected, but for his domestic arrangements being in some disorder, on account of the expected return of his daughter from finishing her education at Paris.
If you want to improve your Sharpe ratio, you can simply add more stocks that generate higher expected returns at comparable risks.
''According to the agronomist, the expected returns from arabicum on one acre is Sh850,000, while cost of production is Sh200,000.
In terms of countries, the highest expectations came in from investors in Indonesia, where they expected returns of 17.1 per cent per year.
The paper then tests directly the relevance of country risk premium in individual stocks' expected returns in the Brazilian market.
Anyone who goes through the trouble of putting together a variance and covariance matrix and estimating expected returns is probably averse "to going with her gut" when selecting among those efficient possibilities.
Out of 26 countries with available data, figures show Ireland ranked 11th place in the gap between expected returns and actual tax collected.
That data is then displayed in a classic scatter-plot graph, which looks at volatility and expected returns over the next 10 years.
Clients receive Expected Returns and Factor Payoffs each month for the region as a whole or for individual countries within the region.
Determination of Asset Allocation strategy through - Determination and updating of the various securities and real estate sectors, the reference points for each segment, the diversification characteristics of each sector, the weights of the different sectors,- Estimation of volatility and the expected returns of the asset classes, the individual funds and the overall portfolio of INARCASSA,- Estimates of the correlations between the individual compartments,- Sensitivity analysis of the results to changes in the estimated parameters (expected returns, volatility, correlations) and the assumptions made (inflation, taxation).

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