Mean Return

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DEFINITION of 'Mean Return'

1. In securities analysis, it is the expected value, or mean, of all the likely returns of investments comprising a portfolio. It is also known as "expected return".

2. In capital budgeting, it is the mean value of the probability distribution of possible returns.

INVESTOPEDIA EXPLAINS 'Mean Return'

Mean returns attempt to quantify the relationship between the risk of a portfolio of securities and its return. It assumes that while investors have different risk tolerances, rational investors will always seek the maximum rate of return for every level of acceptable risk. It is the mean, or expected, return that investors try to maximize at each level of risk.

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