Term Glossary

Metrics, Models & Concepts

Expected Return


Expected rate of return represents the mean of a probabilty distribution of possible returns on the asset. For discrete return distributions it is a probability-weighted sum of all return realizations: \begin{equation} E(r)=\sum\limits _{i=1}^{\infty}r_{i}\, P(r=r_{i}) \end{equation} \begin{equation} \sum\limits _{i=1}^{\infty}P(r=r_{i})=1 \end{equation}

\(r\)
asset return
\(P(r=r_i)\)
probability of i-th return realization
For continous return distributions, expected return is an integral measure: \begin{equation} E(r)=\int_{-\infty}^\infty r f(r)\, \mathrm{d}r \end{equation}
\(r\)
asset return
\(f(r)\)
probability density function of return distribution


Function Reference
portfolio_expectedReturn, position_expectedReturn