Portfolio Theory
Expected Return
Definition
What is Expected Return?
The probability-weighted average of possible future returns or an estimate of future return.
Example in practice
How This Looks in Practice
A 50% chance of 20% and 50% chance of 0% gives a 10% expected return.
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Related Terms
Portfolio Theory
Capital Asset Pricing Model
A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.
Portfolio TheorySecurity Market Line
A line showing the CAPM relationship between expected return and beta.
Portfolio TheoryEfficient Frontier
The set of portfolios offering the highest expected return for each level of risk under stated assumptions.
Fraud & ScamsPonzi Scheme
A fraud that pays earlier participants using money from newer participants rather than genuine investment profits.