risk

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Related to Risk Seeking: Risk neutral, Risk Lovers

Risk

Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk.

Risk

The uncertainty associated with any investment. That is, risk is the possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential of a higher return. For example, a zero-risk investment, such as a U.S. Treasury security, has a low rate of return, while a stock in a start-up has the potential to make an investor very wealthy, but also the potential to lose one's entire investment. Certain types of risk are easier to quantify than others. To the extent that risk is quantifiable, it is generally calculated as the standard deviation on an investment's average return.

risk

The variability of returns from an investment. The greater the variability (in dividend fluctuation or security price, for example), the greater the risk. Because investors are generally averse to risk, investments with greater inherent risk must promise higher expected yields.

Risk.

Risk is the possibility you'll lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed.

According to modern investment theory, the greater the risk you take in making an investment, the greater your return has the potential to be if the investment succeeds.

For example, investing in a startup company carries substantial risk, since there is no guarantee that it will be profitable. But if it is, you're in a position to realize a greater gain than if you had invested a similar amount in an already established company.

As a rule of thumb, if you are unwilling to take at least some investment risk, you are likely to limit your investment return.

risk

see UNCERTAINTY AND RISK.

risk

Uncertainty regarding the possibility of loss.

References in periodicals archive ?
This literature indicates that options may indeed generate incentives for risk taking, but that option compensation does not strictly increase risk seeking in all settings (Carpenter 2000; Tian 2004).
Firms which were risk seeking were more closely quasi-integrated at a given level of asset specificity than were risk averse firms.
Second, although the participants were inclined to avoid risks in their decision making in the gain condition, the degree of their risk seeking increased after they repeatedly made choices that offered certainty of gains.
The results of the hierarchical regression analysis of risk preferences of debt show that risk seeking is a significant predictor of debt behavior.
67% (civil sample) risk seeking under balance formats suggest that participants had a tendency towards risk seeking in the absence of positive or negative framing.
Participants were therefore more risk seeking in distant others (M = 9.
When choosing between a risk-free investment and an annuity contract, the individual will behave risk seeking and thus choose the annuity.
The recklessness of the pilot may be more representative of the risk seeking behaviour of relatively junior year ego-driven commanders," he wrote.
Dr Dennis Lendrem, of the University of Newcastle, said: "Idiotic risks are defined as senseless risks, where the apparent payoff is negligible or non existent, According to 'male idiot theory' (MIT) many of the differences in risk seeking behaviour, emergency department admissions and mortality may be explained by the observation that men are idiots and do stupid things.
On the other hand, prospect theory predicts that investors would be risk averse in gains and risk seeking in losses, regardless of their level of wealth.
Blastland and Spiegelhalter present this humorous risk assessment of daily activities through the eyes of several characters ranging from highly risk averse to risk seeking.