Expected value

Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.

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.
References in periodicals archive ?
In either case, whether or not the expected value rises or falls will depend upon the elasticity of entry with respect to price.
zones, the scope of the claim renders the claim's expected value to
In effect, they are concerned with the most likely outcome, as the expected value is calculated by weighing up the possible outcomes by their probabilities and summing the result.
Expected values are used to compare the general tendencies one can logically anticipate when selecting different alternatives in a decision problem.
The expected value for sales in this case is less clear because sales are increasing at a reduced rate, at least for the years being evaluated, as compared with Example 1.
Known minimum value approach: This approach is to be used when the outcome and cost uncertainties are so great that it is premature to estimate an expected value or most likely value.
n] are regarded as random variables having the same normal sampling distribution with expected value zero and variance [[sigma].
A more advanced approach beyond expected value is application of Monte Carlo Analysis.
The first term in Equation 5 is just a number, so it is unaffected by the expected value operator.
There are numerous issues where the expected value of the settlement positions will have a wide variance and non-normal distribution.