Minimum expected return in Constructing Sub-Portfolios using Goals-Based approach
I have a question regarding the subject.
How Minimum expected returns for a given investment horizons and at specific probabilities are calculated ? It looks like the calc process is out the scope of the curriculum but I would like to get a general idea at least.
In the Reading 13, Exhibit 36 we’ve got “Annualized Minimum Expectation Returns” for each Time Horizons (5,10,15…) and at Required Success (Probabilities: 99,95…).
How the expected returns are different for different time horizons and probabilities ? I could guess that they may be different at different probabilities using corresponding number of Stdevs from the mean. But still in this case there would be a mismatch in the calculus !
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