The expected return on a risky asset, given a probability distribution for the possible rates of return. Expected return equals some risk-free rate (generally the prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference between the historic market return, based upon a well diversified index such as the S&P 500 and the historic U.S. Treasury bond) multiplied by the asset's beta. The conditional expected return varies through time as a function of current market information.
Nearby TermsExpected future return Expected rate of inflation Expected return Expected return on investment Expected return-beta relationship
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University