Expected value

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Expected value

The weighted average of a probability distribution. Also known as the mean value.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
So, its expected value [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] is also equal to [??]([mu] + [delta], ..., [mu] + [delta]) with probability 1, and thus, the equality that described that this estimate is unbiased takes the form
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(3) But using monetary figures for the value of life the government itself has used, the expected value of a mortality risk of 1 in 100,000 is $60.
Then, using Equation 11, the expected values of the two options are given by:
, [x.sub.n] with equal expected values and stated variances [[sigma].sub.1.sup.2], ...
The effect of price changes on individual expected values is summarized as:
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with the highest expected values. Certainly, then, the Burkean critique
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In the new data's defense, Hemley notes that he and his colleagues used their measurement method on a variety of types of natural and synthetic diamonds of known hardness and obtained the expected values.