Risk-return trade-off

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Risk-return trade-off

The tendency for potential risk to vary directly with potential return, so that the more risk involved, the greater the potential return, and vice versa.

Risk-Return Trade-Off

The concept that every rational investor, at a given level of risk, will accept only the largest expected return. That is, given two investments at the exact same level of risk, all other things being equal, every rational investor will invest in the one that offers the higher return. The risk-return tradeoff is pervasive throughout economics and finance. It is the reason that riskier bonds pay higher coupons than other bonds. It is also the reason that bonds pay lower returns than most stocks because they are a less risky investment. The Markowitz Portfolio Theory attempts to mathematically identify the portfolio with the highest return at each level of risk. See also: Markowitz Efficient Portfolio.
References in periodicals archive ?
Formed in 2005, the quantitative investment team manages a diverse range of systematic products across the risk-return spectrum including passive, enhanced passive, smart beta (SMARTER Beta), and active quant strategies.
PGIM Real Estate's tenured team offers to its global client base a broad range of real estate investment vehicles that span the risk-return spectrum across core, core plus, value-add, debt, securities, and specialized investment strategies.
For investors willing to move further out on the risk-return spectrum, there are some attractive alternative sources of yield outside of lower-risk traditional fixed income.
The company invests across the risk-return spectrum, favouring opportunities where it can employ leasing, capital investment and management expertise to create additional value.
With bond yields still hovering in the low single digits, he said, it is critical to evaluate a "new yield order" of nontraditional sources of yield that may be further out on the risk-return spectrum, such as senior floating-rate loans, master limeted partnerships and, on a selective basis, emerging market debt.
To that end, we build non-proprietary portfolios that run the risk-return spectrum from conservative to aggressive.
Using historical return data over the past five years, an optimal mixed-asset portfolio would have included REITs at nearly every point along the risk-return spectrum.
We now have the ability to offer investors an expanded array of investment programs across the risk-return spectrum in the dynamic markets throughout the region.
Andrew Konopelski, Head of EQT Credit and Partner at EQT Partners, comments: When the first EQT Credit fund was launched in 2008, the vision was to have a suite of funds that could provide capital to businesses across the risk-return spectrum, and the closing of EQT Mid-Market Credit is another important milestone for EQT Credit.
PREI offers to its client base a broad range of real estate investment vehicles across the risk-return spectrum and geographies, including core, core plus, value-add, opportunistic, debt, securities, and specialised investment strategies.
There are three fixed income "staples" for 401(k) lineups to cover the risk-return spectrum, Sommer said: "U.
The high-income fund is intended to fill a space on the risk-return spectrum between our municipal bond and equity fund offerings, and provides an important asset allocation category for all investors.