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Presidential Address: Expected Return, Realized Return, and Asset Pricing Tests
Author(s) -
Elton Edwin J.
Publication year - 1999
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00144
Subject(s) - capital asset pricing model , business , economics , actuarial science , financial economics
Finance theory indicates that investor decisions are based on expected, rather than actual, returns. Nevertheless, nearly all research into asset-pricing models has been based on actual returns. The author points out that actual returns are not a reasonable proxy for expected returns. He develops an approach for estimating expected returns and applies it to the analysis of returns on Treasury securities. He also addresses implications for analyzing stock returns.