Market Return
Also called Expected Market Return · Rm
The Market Return is commonly used in the CAPM formula to calculate the Cost of Equity (CoE). It is typically quantified as the average return for a major market index like the S&P 500. It is used in conjunction with Beta to determine the Market Risk Premium.
Why Market Return matters in investment banking interviews
One of two inputs to the market risk premium. Being able to name a reasonable figure and its source — long-run S&P 500 average — keeps you from freezing on a follow-up question.