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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:
Given a number of competing investment opportunities, investors are expected to put their capital to work in order to maximize the return. In other words, the cost of capital is the rate of return that capital could be expected to earn in the best alternative investment of equivalent risk; this is the opportunity cost of capital. If a project ...
( ()) is the market premium, the expected excess return of the market portfolio's expected return over the risk-free rate. A derivation [ 14 ] is as follows: (1) The incremental impact on risk and expected return when an additional risky asset, a , is added to the market portfolio, m , follows from the formulae for a two-asset portfolio.
An investment’s “expected return” is a critical number, but in theory it is fairly simple: It is the total amount of money you can expect to gain or lose on an investment with a predictable ...
This investment had a negative 40% ROI in two and a half years. Return on Investment and Time. The basic ROI calculation does not consider the amount of time the investment is held. If you only ...
I expected the stock market would surge in the fourth quarter because of interest rate cuts by the Federal Reserve. The Fed indeed cut rates in Q4, but stocks didn't jump as much as I anticipated ...
According to this model, the return of any stock can be decomposed into the expected excess return of the individual stock due to firm-specific factors, commonly denoted by its alpha coefficient (α), the return due to macroeconomic events that affect the market, and the unexpected microeconomic events that affect only the firm.
In finance, the T-model is a formula that states the returns earned by holders of a company's stock in terms of accounting variables obtainable from its financial statements. [1] The T-model connects fundamentals with investment return, allowing an analyst to make projections of financial performance and turn those projections into a required ...