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Expected return of a portfolio

Gives the expected return of a portfolio as the weighted sum of the expected returns of its individual assets. It is the return side of modern portfolio theory, where weights are the fractions of total wealth invested in each asset.

\operatorname{E}(R_p) = \sum_i w_i \operatorname{E}(R_i)

What the symbols mean

expected return of the portfolio
weight (fraction of total portfolio value) invested in asset i
expected return of asset i
index running over the assets in the portfolio

About this formula

  • FieldEconomics and finance
  • TopicPortfolio theory
  • LevelUniversity
  • Also calledportfolio expected return, weighted average expected return, expected return of a portfolio of assets, modern portfolio theory expected return, MPT portfolio return formula, portfolio return weighted sum
  • SourceWikidata Q1072885

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