Abnormal return is an academic term referring to the return that is different from expectations after taking into consideration all of the risks associated with the strategy. Risks can be derived using a single-factor CAPM approach or multi-factor APT model. The abnormal returns are those that differ from CAPM and APT-derived expected returns. Active managers seek positive abnormal return, and scholars seek any statistically significant abnormal return.
Synonym: exceptional return
Liz: At an initial client meeting last week,
Guy gloated about our 5-year streak of
abnormal returns .
Kim: Yeah, Mr. PhD knows a thing or two about being abnormal.
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