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Forecast return definition

A passive manager accepts investment valuation levels at any point in time. An active manager acts on valuations that differ from proprietary forecasts.


Forecast return is the rate of return on an asset for a future time period measured using mathematical techniques. Only an active manager calculates forecast return, as it is used to determine if an asset is cheap or expensive. The active manager subtracts expected return from forecast return to create a buy or sell signal, or alpha signal.

Synonym: anticipated return

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Historical refers to the past. Expected refers to the present. Forecast refers to the future. | True or False?


In a Sentence

Pam:  We're so grateful you separated out historical, expected and forecast return .
Guy:  No problem. We just needed words to express past, present and future. Financial Engineering 101.


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~/ home  / finance  / glossary  / forecast return

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