# Questions tagged [expected-return]

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### Are asset return means difficult to predict because they have no lower bound?

In finance, it is widely known that the volatility of asset returns ($\sigma$) are easier to predict than the expected value of asset returns ($\mu$) , otherwise known as the average return or mean. ...
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### Expected returns for scalping futures [closed]

I've been an investor for about 12 years now. My annual return, November 2008 until today, is 25.77% on my stock portfolio, which is heavy on AAPL, BRK.B and recently TSLA. Mostly buy and hold, hardly ...
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### Results of Fama french three factors model and Fama MacBeth cross sectional regression

I am doing research work on “Idiosyncratic volatility and stock return”. I have calculated Idiosyncratic volatility with the help of Fama french three factor model. IV is defined as the standard ...
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### Citation for the definition of Return on Investment

I am writing a paper in an area where the concept of Return on Investment may not be clear. Is there a definitive source for its definition I can cite?
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### Why do surprises in macroeconomic variables average out to zero?

In the book Investments (Bodie, Kane, Marcus), in chapter 8, the authors discuss index models (page 247) and, in its context, systematic risk. The authors state, without explanation, that the market ...
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### portfolio return, sharpe ratio and value at risk

Can you please help me to confirm if my calculations are correct or need improvement, or (too simplistic...) : - portfolio return, - portfolio standard deviation, - portfolio sharpe ratio - ...
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### What are the assumptions in the first-stage of Fama-MacBeth (1973)?

According to the CAPM, the expected return of asset $i$ is: $E(Z_i) = \beta_{im} E(Z_m)$ where $Z_m$ is the excess return on the market portfolio, and $Z_i$ is the excess return of asset $i$ over ...
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### What should happen to the equity risk premium as rates change?

Suppose I set forward-looking expected returns for capital markets using a dividend discount model framework, under which expected return for equities is the sum of dividend yield, expected trend ...
38 views

### Should the targeted rate of return stay the same regardless of the currency?

I work for a european company which invests mostly in the euro zone but also in the UK. I'm in charge with calculating the hurdle rate targeted for these investments. The internal guidelines are for ...
58 views

### Options trade - statistically expected return calculation?

I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, consider the following spread On the left hand side we see: maximal ...
114 views

### How to calculate the expected stock returns for an individual stock?

I know about CAPM. My question is if this method is also viable: Calculate monthly logReturns ...
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### How can risk-neutral pricing find the right price for securities if it doesn't account for risk premia?

I'm confused as to how a method that values securities purely on their expected return works in the real world if it doesn't take into account the fact that investors demand a higher return for ...
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### Is it OK to consider the expected return is zero for stocks when calculating VaR over a short horizon?

I want to implement the approach described in the following recipe for calculating VaR: Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations I was told that I can ...
33 views

### Distress firms and cross section returns

In George and Hwang's 2010 JFE paper, they are trying to resolve the so called distress risk and leverage puzzles. This is their explanation: This is a puzzle because high distress intensity or ...
Say, I have hourly returns $r_1,r_2,...,r_T$, where $r_t$ = $ln(p_t)$ - $ln(p_0)$ for $t = 1...T$. So what is the value of $E[r_t]$? Would $r_T$ be the $\prod{(r_t)}$? Basically $r_t$s are the ...