# Expected value

(redirected from*mathematical expectation*)

Also found in: Dictionary, Thesaurus, Encyclopedia, Wikipedia.

## 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.

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

Want to thank TFD for its existence? Tell a friend about us, add a link to this page, or visit the webmaster's page for free fun content.

Link to this page: