Expectations are simply weighted averages of probabilities and something else. Two particular expectations are useful. The mean is the expected value of the variable itself. The variance is the expected deviation from the mean squared. We will describe historical returns below using the average and standard deviation of returns.
Standard deviation is one measure of risk.
Recall that we defined risk to be the chance that actual returns turn out to be much different than what was expected. The greater the standard deviation, the greater this chance. These transparencies contain much information about historicl returns. They indicate returns by year for different financial assets. They also indicate the average risk premiums.