Search results
Results from the WOW.Com Content Network
The risk–return spectrum (also called the risk–return tradeoff or risk–reward) is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment. The more return sought, the more risk that must be undertaken.
The relationship between risk and return is often represented by a trade-off. In general, the more risk you take on, the greater your possible return. Think of lottery tickets, for example.
A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. [1] It is used widely in finance and economics, the general definition being the expected risky return less the risk-free return, as demonstrated by the formula below. [2]
In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, [ 1 ] it is widely believed to be an improved alternative to its predecessor, the capital asset pricing model (CAPM ...
Risk and return are, effectively, two sides of the same coin. In an efficient market, higher risks correlate with stronger potential returns. ... Know This About the Relationship Between Risk and ...
With this measure in place, the expected, i.e. required, return of any security (or portfolio) will then equal the risk-free return, plus an "adjustment for risk", [6] i.e. a security-specific risk premium, compensating for the extent to which its cashflows are unpredictable. All pricing models are then essentially variants of this, given ...
The risk-return ratio is then defined and measured, for a specific time period, as: = / Note that dividing a percentage numerator by a percentage denominator renders a single number. This RRR number is a measure of the return in terms of risk.
The risk, return, and correlation ... This was followed by a long literature on the relationship between economic growth and volatility. [30] More recently, modern ...