Expected ERA (XERA) depicts a pitcher's "True ERA" based on the factors within a pitcher's control. These factors include Hits, Walks, Home Runs allowed and K's. When one considers the inequity with the ERA calculation, specifically related to defense and base runners inherited/left, many including myself consider XERA to be a more precise gauge of ability.
Expected ERA is a term coined by 2 stat researchers (Gill and Reeve), who developed the following mathematical formula ((.575 * H/9 ) + (.94 * HR/9 ) + (.28 * BB/9 ) - (.01 * K/9 ) - Normalizing Factor). The normalizing factor is based on the league (typically in the .270 and .285 range)
The best way to use XERA is to compare it to the actual ERA. Using the delta between the two indicators we can make observations as to whether the pitcher's ERA was a true gauge of his ability for the given period. For example, in 2011 Gavin Floyd posted a 4.37 ERA, yet his expected ERA was .88 points lower. A rebound in 2012 is likely.
Below is a list of the top 20 pitchers from 2011, who had a Higher than expected ERA (a rebound is likely for these pitchers - left column) and those who had a Lower than expected ERA (a regression is likely - right column). The number indicated is the net difference between the pitchers actual and expected ERA.
XERA is one of the many sabermetric indicators that we use to create our Player Projections located in the 2012 Player Projections Draft Software.