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Calculating expected returns

How to Calculate Expected Return Using Historical Data

To calculate the expected return using historical data, you’ll want to take an average of each outcome. Here’s an example of what that would look like.

YearReturn
200014%
20012%
200222%
200334%
20045%
2005-18%
2006-21%
200729%
20086%
200916%
201022%
20111%
2012-4%
20138%
2014-11%
201531%
20167%
201713%
201822%
Average9%

In this example, the average rate of return is 9%. When using historical data, you may want to consider your pool of data. Are you using all of the data available? Or only data from a select period? If you are only using some data and not others, why?

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