What is an 'Actual Return'

An actual return is the actual gain or loss of an investor. This can be expressed in the following formula: expected return (ex-ante) plus the effect of firm-specific and economy-wide news.

BREAKING DOWN 'Actual Return'

As opposed to expected return, actual return is what investors actually receive from their investments. The discrepancy between actual and expected return is due to systematic and unsystematic risk.

RELATED TERMS
  1. Ex-Ante

    A term that refers to future events, such as future returns or ...
  2. Return

    The gain or loss of a security in a particular period. The return ...
  3. Target Return

    A pricing model that prices a business based on what an investor ...
  4. Active Return

    The percentage gain or loss of an investment relative to the ...
  5. Mean Return

    1. In securities analysis, it is the expected value, or mean, ...
  6. Expected Return

    The amount one would anticipate receiving on an investment that ...
Related Articles
  1. Investing

    What Does Ex-Ante Mean?

    Ex-ante refers to future events. It’s a term that in Latin means, “before the event.” It is the opposite of ex-post, which in Latin means, “after the fact.”
  2. Investing

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  3. Investing

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  4. Investing

    Valuation Models: Apple’s Stock Analysis With CAPM

    The capital asset pricing model, or the CAPM, estimates the expected return of an asset based on the systematic risk of the asset’s return.
  5. Investing

    How To Manage Portfolio Risk

    Follow these tips to successfully manage portfolio risk.
  6. Investing

    More Ways to Evaluate Portfolio Performance

    The Jensen measure is another tool investors use to include risk when measuring portfolio performance.
  7. Investing

    How To Calculate Your Investment Return

    How much are your investments actually returning? Find out why the method of calculation matters.
  8. Investing

    What is Unsystematic Risk?

    Unsystematic risk is the part of an investment’s risk that is attributable to the investment itself — not to the entire economic system.
  9. Investing

    What are Excess Returns?

    Excess returns are investment returns that exceed a benchmark or index with similar risk.
  10. Investing

    What is a Return?

    A return is the gain or loss a security generates over a period of time.
RELATED FAQS
  1. Why do some investors believe that unsystematic risk is not relevant?

    Read about a stock market theory that suggests that unsystematic risks are rendered irrelevant through widespread portfolio ... Read Answer >>
  2. How is the expected market return determined when calculating market risk premium?

    Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>
  3. How does the required rate of return affect the price of a stock, in terms of the ...

    First, a quick review: the required rate of return is defined as the return, expressed as a percentage, that an investor ... Read Answer >>
  4. How can a company reduce the unsystematic risk of its own security issues?

    Understand the basic concepts of systematic and unsystematic risk, and learn steps a company can take to reduce its level ... Read Answer >>
  5. What's the difference between absolute and relative return?

    Knowing whether a fund manager or broker is doing a good job can be a challenge for some investors. It's difficult to define ... Read Answer >>
  6. How is the Capital Asset Pricing Model (CAPM) represented in the Security Market ...

    Learn about the capital asset pricing model and the security market line and how the model is used in the calculation and ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center