Abnormal Return
In short: An abnormal return describes exceptionally high gains compared with what an investment would normally be expected to earn.
An abnormal return describes exceptionally high gains compared with what an investment would normally be expected to earn. Formally, it is the difference between the actual return and the expected return, so the same measure can also reveal unusually poor results.
Why it matters
Analysts use abnormal returns to test whether a specific event, such as a listing announcement, a protocol upgrade or a hack, moved a price beyond the general market trend; this method is called an event study. The expected return usually comes from the overall market or a pricing model, so the result depends on that choice. In small tokens, very large and fast gains are sometimes driven by hype, thin liquidity or coordinated pump-and-dump schemes, and they can reverse just as quickly.
Example
Suppose the crypto market rises 2% on a given day, and a model based on a token’s past behavior expects that token to gain about 3%. Instead, it jumps 15% after its project announces a major integration. The abnormal return is roughly 12 percentage points: the 15% actual gain minus the 3% expected gain. If the token had gained exactly the expected 3%, its abnormal return would be zero.