Expectations Index
If you just got married, got a dog, or bought a high-maintenance car, you probably have expectations of what you’re getting into.
There’s an official measure for this in regards to buying stuff...called the Expectations Index.
The Expectations Index is part of the Consumer Confidence Index, which is published monthly. It provides updates on how everyone is perceiving the economic outlook of the next six months. When people feel things are good (maybe they have a stable job and income), they're more likely to spend, keeping the economy’s happy face on.
When people feel things are turning for the worse (maybe unemployment is up, and layoffs are afoot in the market), they're more likely to save up, which could make the economy take a nosedive.
Expectations are kind of a big deal. Hopefully you have great ones.
Related or Semi-related Video
Finance: What is an Expected Return?8 Views
Finance, a la shmoop. what is expected return? Okay we've been experimenting for
months on libertarians with cancer in a gwangju prison. Our drug is gonna do one [ man swallows pill]
of three things. A. it may make the prisoners glow in the dark. Not all that
useful as a drug discovery but it would allow investors to sell the company to [man's face glows]
cirque de soleil who would be thrilled to cut down on bodypaint expenses. All
right well if event A happens investors will get at least a 20% return on our [circus performers shown]
money odds of the the glow must go on happening ? 35% . okay moving on. Event B, our
drug may well just kill them - yeah that's a bunch of libertarians in a gwangju
prison. Who's gonna notice, right? in which case investors lose all of their money [money on fire]
and the glow must go on just folds up tent, and goes away. The return there
would be zero. Odds of this happening? Well, 60% yeah
six out of ten. Probably gonna die. okay event C the drug cures cancer! If that [written explanation shown]
happens while investors get a thousand percent return on their money .Save the
world and in general improve their tinder match ratio by like a zillion.
Odds of this happening, well just 5% but hey it's worth a shot right?
So our adjusted probability chart looks like- this - see we got return and odds and [chart shown]
expect the case 2035, 7 yeah there we go.
So what is all this telling us ? Well that the overall expected return - yeah you
knew we'd get there eventually - is a 57% return on our investment. Great return!
bottom line do it the chance of curing cancer would be well worth the risk. And [people dance]
if not well at least there would be fewer bicycling accidents.
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