Expected Return

Expected Return

Return that is expected from risky assets. The expectation is based on probability distributions for the potential return rates. Equals some zero risk rate (normally derived from Treasury note rate or bond rate) and a risk premium in addition, multiplied by the assets beta. The risk premium is the gap between historic market return, as derived from a highly diversified index and U.S. Treasury bond’s historic return.

Related posts:

1. Expected Return-Beta Relationship
2. Expected Return on Investment
3. Expected Future Return
4. Expected Value of Perfect Information
5. Exante Return