Mathematical versus Psychological Expectation

Mathematical versus Psychological Expectation

Mathematical expectations are formed at a given time t by averaging the projected outcomes of random variables under different scenarios (with different probabilities), given an information set available at the time t.

Psychological expectations are loosely defined and need not be formed by implicit scenario averaging. For example the subjective internal view around an expected outcome may be formed around most likely outcome rather than the probability weighted averages of outcomes.

See Also

• Expectation Measure