Mean Return

AAA

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.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Expected Value

    Anticipated value for a given investment. In statistics and probability ...
  4. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  5. Abnormal Return

    A term used to describe the returns generated by a given security ...
  6. Capital Budgeting

    The process in which a business determines whether projects such ...
Related Articles
  1. Options & Futures

    Calculating The Equity Risk Premium

    See the model in action with real data and evaluate whether its assumptions are valid.
  2. Fundamental Analysis

    The Equity-Risk Premium: More Risk For Higher Returns

    Learn how the expected extra return on stocks is measured and why academic studies usually estimate a low premium.
  3. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  4. Options & Futures

    Was Buffet Right about Derivatives as WMDs?

    Why Warren Buffet described derivatives as weapons of mass destruction, and when can they be helpful or harmful?
  5. Mutual Funds & ETFs

    How To Choose The Right ETF?

    Choosing the right ETF really isn’t that complicated. If you stay focused on a few key areas, you may find the experience to be much easier.
  6. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
  7. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.
  8. Bonds & Fixed Income

    How to Diversify with Muni Bond ETFs

    Thinking of diversifying with bonds? Consider these muni bond ETFs.
  9. Trading Strategies

    Capitalize On Collars To Enhance Your Trades

    Trade collaring measures current technicals and makes swift adjustments to account for environmental changes.
  10. Technical Indicators

    Strategies To Trade Volatility Effectively With VIX

    VIX offers a bird’s eye view of real-time greed and fear, while providing a snapshot of the market’s expectations for volatility in the next 30 days.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center