How are expected returns calculated?
Your portfolio's total expected return is calculated by taking a weighted sum of the expected returns of the underlying securities in your portfolio (visible on the Details page). The expected return figures for each security are calculated either by using standard market returns (CAPM) or Global Predictions forecasting model (depending on your entered investor preferences). The Global Predictions model uses a large ensemble approach (combining ML, statistical, CAPM, and economic models) to maintain a widespread understanding of what is happening in the economy at all times, predicted out 12 months into the future. These models have been tested and are regularly improved, built on top of the time-tested Global Predictions infrastructure and Economic Insights Engine. The model outputs include both expected returns and risk, allowing risk to play an important role in the product's analysis and recommendations (e.g. a 8% +/- 20% return is considered very differently than a 5% +/- 2% return). This approach is inspired by what you might find at top-tier systematic macro hedge funds. Read more about the technology that powers the entire system here.
