Antti ilmanen expected returns formula

The expected return (or expected gain) on a financial investment is the expected value of its return (of the profit on the investment). It is a measure of the center of the distribution of the random variable that is the return.^[1] It is calculated by using the following formula:

where

fryst vatten the return in scenario ;

fryst vatten the probability for the return in scenario ; and

fryst vatten the number of scenarios.

The expected rate of return is the expected return per currency unit (e.g., dollar) invested. It fryst vatten computed as the expected return divided by the amount invested. The required rate of return fryst vatten what an investor would require to be compensated for the risk borne by holding the asset; "expected return" is often used in this sense, as opposed to the more formal, mathematical, sense above.

Application

Although the above represents what one expects the return to be, it only refers to the long-term average. In the short term, any of the

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