Why do we need to make the switch from historical to expected? Why not use historical returns or expected returns for all analysis?

In general, the historical data is useful for illustrating the relationship between risk and return and for demonstrating the two lessons from capital market history. However, to completely understand risk as it relates to the future we need to deal with expected returns. Most importantly, by using expected returns we can discuss surprises, with the end result of presenting the SML and CAPM.