Ex Ante vs ex Post Ex ante means before the fact Ex ante return is the return the investor expects to receive EX post means after the fact EX post returns are actual(historical)returns earned
Ex Ante vs Ex Post ◼ Ex ante means before the fact. ◼ Ex ante return is the return the investor expects to receive. ◼ Ex post means after the fact. ◼ Ex post returns are actual (historical) returns earned
Expected Return- Single Asset Weighted average of the possible returns: n k=∑k×P i=1
Expected Return - Single Asset Weighted average of the possible returns: = = n i 1 i Pri k k
Example 1: Expected Return and Risk- Single Asset Possible returns probability of Occurrence 0.10 0.30 0.5 0.60 03
Example 1: Expected Return and Risk - Single Asset Possible Returns ki Probability of Occurrence Pri -0.10 0.1 0 0.1 0.30 0.5 0.60 0.3
Example l Solution k=∑k =(-0.10×0.1)+(0×0.1)+(0.30×0.5)+(0.60×0.3 -0.01+0+0.15+0.18 =0.32or32
Example 1 Solution ( ) ( ) ( ) ( ) 0.32 or 32% - 0.01 0 0.15 0.18 - 0.10 0.1 0 0.1 0.30 0.5 0.60 0.3 k k Pr n i 1 i i = = + + + = + + + = =
Ex Post(Arithmetic Mean) Return ∑k 1=1 n
Ex Post (Arithmetic Mean) Return n k k n i 1 i = =