WebCab Portfolio for .NET v5.0 Demo

AssetParameters.ExpectedReturn Method (Double[])

Estimates the expected return from the historical values of an asset by evaluating the arithmetic average of the returns over the period considered.

public double ExpectedReturn(
   double[] historicalReturns
);

Parameters

historicalReturns
historicalReturns[t] is the return (in absolute or relative percentage terms) of the asset in the tth period. Note that if the absolute (resp. percentage) returns are used then the estimated expected return will be expressed in absolute (resp. relative percentage) terms. Moreover, if the daily returns are used then the estimated return will be an estimate of the daily return and so on.

Remarks

This method applies exactly the same procedure as ExpectedReturns except that here we evaluate the expected return of one asset rather than the expected return of a collection of assets.

The number of historical values which should be used

The number of historical values used here in order to estimate the expected return should reflect the length of the period over which a reliable estimate of the return is required. For example, if an estimate of the 1-month return is sort then it is reasonable to use at least the last 1-months historical values up to a few years historical values in its estimation.

If the market under consideration goes through seasonal or business cycles, or if a given company has transformed itself then the observations used in order to estimate the expected return should reflect these issues. For example, if company which was a diversified general industrial company has since refocused on certain key areas, then in terms of estimating its expected return from its historical values it is reasonable to only consider the period after the company refocused.

See Also

AssetParameters Class | WebCab.Libraries.Finance.Portfolio Namespace | AssetParameters.ExpectedReturn Overload List