Evaluates the expected return of the Market Portfolio when the asset weights of the Market Portfolio are known.
historicalReturns[i][t]
is the return (in absolute or relative percentage terms) of the i
-th asset of the collect in the t
th 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.A double equal to the expected return of the Market Portfolio.
The (possibly constrained) asset weights of the market portfolio should be evaluated prior to the application of this method user MarketPortfolio.
Remark: The historical returns of the assets used here will correspond to the historical returns of the asset which was used in the evaluation of the (possibly constrained) Efficient Frontier.
Approach used here and other options
Within this method we evaluate the expected returns of the assets from there historical values using a historical approach. That is, the present expected return is estimated to be the arithmetic average of the previous historical expected returns. A weighted average is then used in order to estimate the expected return. This should be the default means by which the (present) expected return of the Market Portfolio is estimated. However, there are a number of competing approaches which you may wish to use; these include:
CapitalMarket Class | Portfolio Namespace | CapitalMarket.MarketPortfolioExpectedReturn Overload List