Business Glossary

total return of an asset or security portfolio less the risk-free return (usually defined as the return on the 90-day Treasury bill) for the period being measured. In modern portfolio theory, excess return represents the risk premium -the reward for taking risk-and is correlated with beta -the measure of market risk-to produce a risk-adjusted return. Excess return is sometimes used to mean abnormal return, the difference between the expected return, given beta, and the actual return.