What does market return refer to?

Market return refers to the return expected from a market index, making it a benchmark for evaluating the performance of individual investments or portfolios. It is typically represented by major stock market indices, such as the S&P 500 or the Dow Jones Industrial Average, which aggregate the performance of a collection of stocks to reflect the overall market's performance.

Investors and portfolio managers often use the market return as a standard to compare against an individual stock's return or a portfolio's return. By understanding the expected market return, they can assess whether their investments are underperforming or outperforming the market as a whole. Additionally, the market return helps inform decisions regarding risk and expected future performance, as it embodies both the success and challenges faced by the overall market.

In contrast, the return of a specific stock focuses on an individual company's performance, while the risk-adjusted return looks at how returns were obtained relative to the risks taken. Historical bond returns pertain to the fixed-income segment of investments, which do not directly relate to the broader market return concept.