In this paper, we study the contribution of frictions to expected returns (CFER). In the presence of market frictions, expected returns will be determined not only by risk factors but also by CFER. We derive an option-based formula to estimate CFER within a formal asset pricing setting. Our formula makes no assumptions on the types of frictions nor on investors’ preferences and it enables us to estimate CFER as a simple scaled deviations from put-call parity.