# Expected value

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## 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 ?
By linking Clapper's substantial-risk requirement with expected value, the standard can draw on probability principles to clarify the doctrine.
the expected value of a claim and its expected marginal cost is the
Similarly, crudely speaking, we do not know the expected value E[[[??].bar]], we only know the lower and upper bounds [E.bar][[[??].bar]] and [bar.E][[[??].bar]] for this mean value.
of penalties are so low that the expected value model predicts that
However, as shown later, in the absence of ambiguity the relative merit index is reduced to (and can be calculated by) the above-mentioned expected value index.
The measured value [x.sub.i] is regarded as the expected value E([X.sub.i]) and the standard uncertainty u([x.sub.i]) is regarded as the standard deviation S([X.sub.i]) of the pdf of [X.sub.i], for i = 1, 2, ...
The partial derivative of the expected value function with respect to the price is written:
of the same or (even higher) expected value whenever changing policies
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]):
Having calculated the probabilities, and NPVs (Tables 2 and 3) for both EMRs, the task force can then determine expected values. Expected values differ from averages.

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