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Investing Glossary:
Expected return
Copyright 2010,
Campbell R. Harvey. All Rights Reserved.
Do not reproduce without explicit permission.
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| Definition: |
| 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 US Treasury bond) multiplied by the Assets beta. The conditional expected return varies through time as a function of current market information.
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