Home  >  113 Math  >  113.036 Statistics - Expected Value

Expected Value

Expected value is the probability weighted average of the possible outcomes. More probable outcomes will have more weight.

In finance, expected value is used a lot. E.g. “expected value of earnings per share”, “dividend per share”, “rate of return”, etc - E(X) = P(x_1)x_1 + P(x_2)x_2 + ... + P(x_n)x_n