Abnormal return

Difference between the actual return of an investment and the expected return, often based on a benchmark or a model like the Capital Asset Pricing Model (CAPM). Essentially, it measures how much better or worse an asset performed compared to what was anticipated given the risk involved.


Positive abnormal return: Outperforms expectations.


Negative abnormal return: Underperforms expectations.


Formula:
Abnormal Return = Actual Return − Expected Return