Abnormal returns

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In stock market trading, abnormal returns are the differences between a single stock or portfolio's performance in regard to the average market performance (usually a broad index s.a. the S&P 500 and EURO STOXX 50 or a national index like the Nikkei 225) over a set period of time. For example if a stock increased by 5%, but the average market only increased by 3%, then the abnormal return was 2% (5% - 3% = 2%). If the market average performs better than the individual stock then the abnormal return will be negative.

$A b n o r m a l R e t u r n = A c t u a l R e t u r n - N o r m a l R e t u r n$

In contrast, excess returns are returns above the risk-free rate, what as used in the CAPM is the expected excess return instead of excess return itself. Expected excess return is so called risk premium by definition. It is Also the way you increase the market at the height of the overall portfolios