Expected return is the return on an asset that is baked-in to market expectations at the present time. An active manager will compare expected return to forecast return when deciding whether an asset is cheap or expensive. This is typically derived by multiplying an asset's beta (see CAPM) by the expected return on the Market.
Synonyms: consensus return, implied return, equilibrium return
Click box for answer.
Pam: The stock had a beta of 2, but then
diversified. So that can't be a valid
expected return .
Eve: I agree, run it through the 3-factor model. Jeez, look at us, now we sound like quant geeks.
Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.
Videos can also be accessed from the YouTube Channel.
If this term had a video, the script would be here.
Our trained humans found other terms in the category timeframes you may find helpful.
For links to all glossary terms and videos click the Outline button below.
Subscribe and you won't miss new videos.
Our next topic is financial assets . Hit Next.