The negative average realized returns, specially in Tokyo Stock Exchange during early 90s and 2000s, has triggered the arguments on the controversial use of realized return in asset pricing tests further. Recently many researchers are arguing on the alternative measure of the expected return....

If realized return is not the ex-post realization of the ex-ante expectation, can we use average realized return to estimate the expected return? In text books, the authors treat realized return as a sample of return. In this paper, we redefine realized return and the ex-post return, and we...