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# Questions tagged [expected-return]

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### Polynomial interpolation of corrected lognormal distribution

Can anyone provide a formula for a polynomial interpolation of the corrected lognormal distribution used to model returns traditionally resulting from the wrong Brownian motion generated model? ...
47 views

### Characterizing relation “ has no less information than” between information systems represented by Markovian matrices

I crossposted this question on math.stackexchange. Background: Suppose that an investor's utility is both determined by the state and her action taken. A fact of life is that she can't observe the ...
339 views

### Correlation between idiosyncratic residuals and forward returns

The classic mean-reversion strategy is to calculate an "expected return" (alpha) by computing the raw return for each security and then remove the part which you think is market driven. Statistically ...
55 views

### Is it possible to calculate the equity required (or expected) return using Black-Scholes option pricing model?

I know the method of calculating the equity value as a European call option (using Black-scholes formula). My question is: Is it possible to calculate the expected (or required) return of equity when ...
105 views

### Black Litterman - numerical instability

I am trying to work out the formula for the posterior mean in Black Litterman's model assuming 100% confidence : Ref: https://corporate.morningstar.com/ib/documents/MethodologyDocuments/IBBAssociates/...
307 views

### Cross-sectional Regression: Using calculated coefficient of first regression for a second regression as dependent variable

Hello stackexchange community! I am new to R and econometrics and and stuck in a step of the fama-macbeth (1973) regression, in which risk premia of stocks are estimated with a two-step regression ...
46 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 ...
70 views

### Deriving Single Index Model (Market Model)

is the return of the stock of observation is the return of the reference market is the regression coefficient between the observed stock and the reference market is the regression intercept between ...
41 views

### Calculate best share based on return of investement and standard devation (Without risk free rate)

I have a microeconomics task in investment analysis. How do you pick the best share based on return of investment and standard deviations? The task is like this: 3 shares: Share A: 10% ROI & 20% ...
34 views

### Investment evaluation benchmarks

I am writing software to aid in the evaluation of investment projects. Specifically, property based as a first step. I know about NPV and IRR and IRR feels like the best measure. So it gives me a ...
43 views

### Are the explanatory factors for a firm's expected returns and its expected earnings/valuation multiples the same?

For example, the 3 factor Fama French model explains much of the cross-sectional variation in equity returns. Would these same 3 factors also explain the cross sectional variation in earnings/EV to ...