Expected Value

AAA

DEFINITION of 'Expected Value'

Anticipated value for a given investment. In statistics and probability analysis, expected value is calculated by multiplying each of the possible outcomes by the likelihood that each outcome will occur, and summing all of those values. By calculating expected values, investors can choose the scenario that is most likely to give them their desired outcome.

INVESTOPEDIA EXPLAINS 'Expected Value'

Scenario analysis is one technique for calculating the expected value of an investment opportunity. It uses estimated probabilities with multivariate models, to examine possible outcomes for a proposed investment. Scenario analysis also helps investors determine whether they are taking on an appropriate level of risk, given the likely outcome of the investment.



RELATED TERMS
  1. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  2. Scenario Analysis

    The process of estimating the expected value of a portfolio after ...
  3. Extrinsic Value

    The difference between an option's market price and its intrinsic ...
  4. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
  5. Mean Return

    1. In securities analysis, it is the expected value, or mean, ...
  6. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
Related Articles
  1. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  2. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  3. Mutual Funds & ETFs

    Understanding Volatility Measurements

    How do you choose a fund with an optimal risk-reward combination? We teach you about standard deviation, beta and more!
  4. Fundamental Analysis

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  5. Investing Basics

    Online Portfolio Management, DIY or Fee-Based Financial Advisor: Which Is Right For You?

    Should you use an online financial planning service, or do professional, fee-based financial planners justify their higher costs?
  6. Chart Advisor

    A Total Stock Market ETF For Any Portfolio

    Utilizing index funds and ETFs, such as Vanguard's VTI, is one of the best ways for the average investor to track the broad markets and minimize fees.
  7. A Monte Carlo simulation allows analysts and advisors to convert investment chances into choices. The advantage of Monte Carlo is its ability to factor in a range of values for various inputs.
    Fundamental Analysis

    What Can The Monte Carlo Simulation Do For Your Portfolio?

    A Monte Carlo simulation allows analysts and advisors to convert investment chances into choices. The advantage of Monte Carlo is its ability to factor in a range of values for various inputs.
  8. Fundamental Analysis

    How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group to find the best mutual fund for you.
  9. Strategic asset allocation is a portfolio strategy that involves setting target allocations.
    Bonds & Fixed Income

    Strategic Asset Allocation

    Strategic asset allocation is a portfolio strategy that involves setting target allocations for various asset classes, then periodically rebalancing the portfolio back to the original allocations ...
  10. Personal Finance

    What is the average salary for an accountant?

    Learn about the average salaries of various accounting positions, and see the difference that an accounting degree makes in attaining higher wages.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center