Risk-return spectrum financial definition of Risk-return spectrum. Risk-return spectrum finance term by the Free Online Dictionary.

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.

Risk-Return Trade-Off

What Does Risk-Return Trade-Off Mean?

The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return trade-off, invested money can render higher profits only if it is subject to the possibility of being lost.

Investopedia explains Risk-Return Trade-Off

Because of the risk-return trade-off, investors must recognize their personal risk tolerance when choosing investments. Taking on additional risk is the price of achieving potentially higher returns; therefore, if an investor wants to make money, he or she cannot cut out all risk. The goal instead is to find an appropriate balance that generates some profit but allows the investor to sleep at night.

Related Terms:
• Modern Portfolio Theory—MPT
• Opportunity Cost
• Return
• Risk
• Risk-Free Rate of Return

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Coefficient of Variation Counterparty Risk CV Efficient Frontier Equity Risk Premium Modern Portfolio Theory risk risk versus reward Risk-Free Rate of Return Risk-Return Tradeoff Unsystematic Risk	Although SBA financing and private equity are at different ends of the risk-return spectrum, they call both offer opportunities for franchisees and franchisors. SBA financing and private equity: two sides of the same coin by Rosenfeld, Jeff / Franchising World 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. Opposites Attract: The Diversification Benefits of REITs by Canter, Todd / Real Estate Weekly 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. Aquila and Former Janus Manager Launch a High-Yield Fund by Business Wire	Risk Premium Approach Risk Profile Risk Ratio Risk Reversal Risk seeker Risk Taker Risk Tolerance Risk Transfer risk versus reward Risk-Adjusted Discount Rate Risk-Adjusted Performance Risk-adjusted profitability Risk-Adjusted Return Risk-Averse Risk-based capital ratio risk-based capital requirement Risk-Free Risk-Free Asset Risk-Free Interest Rate risk-free rate Risk-Free Rate of Return Risk-Free Return Risk-Loving Risk-Neutral Risk-Prone Risk-return spectrum Risk-Return Trade-Off Risk-Return Tradeoff Risk-Reward Ratio Risk-Weighted Assets Riskless Arbitrage Riskless Investment Riskless or Risk-Free Asset Riskless Rate Riskless rate of return Riskless Transaction Risks and Opportunities Risky Asset Risky Operation Risparmiare Risque d'insolvabilite Risque de change Risque de penurie Risque de ralentissement Risque exterieur Risque-Pays Risultato finale Ritenuta alla fonte Ritenuta d'acconto Ritirare i titoli Riyal	Risk-Free Profits Risk-free rate Risk-free rate Risk-Free Rate of Return Risk-Free Rates Risk-Free Rates of Return Risk-free return Risk-Free Returns Risk-Free Securities Risk-Free Security Risk-Free Transaction Risk-Free Transactions Risk-Informed Risk-Informed Inservice Inspection Risk-Informed Licensing Panel Risk-Informed Regulation Implementation Plan Risk-Informed, Performance-Based Regulation Risk-loving Risk-Need-Responsivity Risk-neutral Risk-Neutral Valuation Relationship Risk-prone Risk-Reducing Salpingo Oophorectomy Risk-Reduction Mastectomy Risk-Related Medical History Risk-return spectrum Risk-return trade-off Risk-Return Trade-Offs Risk-return tradeoff Risk-Return Tradeoffs Risk-Reward Basis risk-reward ratio Risk-Reward Ratios Risk-Screening Environmental Indicators Risk-Seeking risk-sharing hypothesis Risk-Standardized Mortality Rate risk-taker Risk-taking Risk-taking Risk-taking Risk-taking Risk-taking Risk-to-Reward Risk-tolerant Risk-tolerant Risk-Weighted Asset Risk-Weighted Assets Risk-Weighted Assets Risk-Weighted Capital Risk-Weighted Capital Ratio Risk/Reward Basis Risk/Reward Trade-Off Risk/Reward Trade-Offs Risk/Reward Tradeoff Risk/Reward Tradeoffs

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References in periodicals archive

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Coefficient of Variation
Counterparty Risk
CV
Efficient Frontier
Equity Risk Premium
Modern Portfolio Theory
risk
risk versus reward
Risk-Free Rate of Return
Risk-Return Tradeoff
Unsystematic Risk

Although SBA financing and private equity are at different ends of the risk-return spectrum, they call both offer opportunities for franchisees and franchisors.

SBA financing and private equity: two sides of the same coin by Rosenfeld, Jeff / Franchising World

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.

Opposites Attract: The Diversification Benefits of REITs by Canter, Todd / Real Estate Weekly

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.

Aquila and Former Janus Manager Launch a High-Yield Fund by Business Wire

Risk Premium Approach

Risk-Adjusted Discount Rate

Risk-Adjusted Performance