Loading the player...

What is 'Ex-Ante'

Ex-ante, derived from the Latin for "before the event," is a term that refers to future events, such as future returns or prospects of a company. Ex-ante analysis helps to give an idea of future movements in price or the future impact of a newly implemented policy.

An example of ex-ante analysis is when an investment company values a stock ex ante and then compares the predicted results to the actual movement of the stock's price.

BREAKING DOWN 'Ex-Ante'

"Ex-ante" refers to any prediction that is made prior to either before all of the variables are known, or generally before an event occurs. For example, an ex-ante price on a stock is an informed estimate functioning as a prediction of future events when not all variables are known. It provides for a predictive model, allowing for the uncertainty surrounding current conditions or any unknown factor that may change the outcome.

In general finance, company earnings may be predicted ex ante. Often, this involves examining current known financial data and extrapolating by considering anticipated activity and previous experiences. For example, a company may note an ex-ante rise in sales due to the release of a new model of one of its products. Ex-ante predictions can apply to anticipated gains or losses, as the term is neutral in regards to the nature of the event.

Ex-Ante and Ex-Post

Once the time allocated in the ex-ante prediction has passed, it can be compared to the actual financials, also referred to as the ex-post. This can help refine future ex-ante price predictions, as it may provide new insight into previously unknown variables. It can also be used to reassess other ex-ante prices that were based on the previous models before those variables were known.

Ex-Ante and Trading

Market forecasts are generally considered to be ex-ante. By examining current market trends and known influences, a prediction is made regarding the direction of individual stocks and securities, or entire exchanges. Since there is no way to be certain that a new factor will not affect actual performance, the ex-ante forecast is not guaranteed to be accurate after the fact.

Often, market predictions cannot entirely understand or account for certain investor decisions. Since not all investor action is rational, it is not possible to predict certain events with absolute certainty. In cases where all factors and influences are known, then it would only apply to investments considered to have no risk. In any circumstance where there is a chance the market will respond in a way that puts the investment at risk, all associated predictions must be considered ex ante.

RELATED TERMS
  1. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  2. Ex-Post

    Another term for actual returns. Ex-post translated from Latin ...
  3. Predictive Analytics

    The use of statistics and modeling to determine future performance ...
  4. Predictive Market

    A speculative market that is based on speculations regarding ...
  5. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  6. Forward Looking

    A business slang term for predictions about future business conditions. ...
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. Trading

    Profit Without Predicting The Market

    Traders who try to predict the future can actually harm their trading options.
  3. Investing

    Understanding Forecasting

    Forecasting is the use of historical data to predict the future.
  4. Financial Advisor

    Predictive Analytics Drives Return for Investors

    A new industry of predictive analysis has developed to make sense of big data and give investors real-time buy and sell recommendations based on the patterns forming in the data long before traditional ...
  5. Trading

    Understanding Trend Analysis

    Trend analysis is the use of past performance to predict future price movement of a security.
  6. Investing

    What Does Ex-Post Mean?

    In Latin, the term ex-post means “after the fact.” Applied to finance and investing, ex-post refers to the analysis and timing of actual returns.
  7. Investing

    The Basics Of Business Forecasting

    Discover the methods behind financial forecasts and the risks inherent when we seek to predict the future.
  8. Investing

    How Do Professionals Forecast Crude Oil Prices?

    Discover how the future price of oil is predicted with a weighted combination of mathematical tools. Economists largely use five main models as their base.
  9. Insights

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  10. Investing

    Introduction To Trading In Oil Futures

    An introduction to oil futures, how the market arrives at oil futures prices, what futures prices mean, and how investors can exploit them.
RELATED FAQS
  1. What is the difference between ex-ante moral hazard and ex-post moral hazard?

    Learn what moral hazard is, the difference between ex-ante moral hazard and ex-post moral hazard and the behavioral changes ... Read Answer >>
  2. What variables are most important when making a prediction through sensitivity analysis?

    Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >>
  3. Which investments have the highest historical returns?

    Stocks are historically considered the best investment in terms of rate of return. Historically, they outperform other investments ... Read Answer >>
  4. Is technical analysis used only to analyze stocks?

    The simple answer to this question is definitely not. This form of analysis can be applied in more situations than you may ... Read Answer >>
  5. What is the difference between moral hazard and morale hazard?

    Learn the difference between morale hazard and moral hazard, and discover how a person might experience each type of hazard ... Read Answer >>
  6. What are some of the limitations and drawbacks of economics as a field?

    Find out why the field of economics is full of controversy. Policy decisions, political campaigns and personal finances are ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center