ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Definition: Investment risk can be defined as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment. Description: Stating simply, it is a measure of the level of uncertainty of achieving the returns as per the expectations of the investor.

Detailed explanation-2: -In the financial world, risk refers to the chance that an investment’s actual return will differ from what is expected-the possibility that an investment won’t do as well as you’d like, or that you’ll end up losing money.

Detailed explanation-3: -First is the principle that risk and return are directly related. The greater the risk that an investment may lose money, the greater its potential for providing a substantial return. By the same token, the smaller the risk an investment poses, the smaller the potential return it will provide.

Detailed explanation-4: -What Is Risk? When you invest, you make choices about what to do with your financial assets. Risk is any uncertainty with respect to your investments that has the potential to negatively impact your financial welfare. For example, your investment value might rise or fall because of market conditions (market risk).

Detailed explanation-5: -Risk simply means that the future actual return may vary from the expected return. If an investor undertakes a risky investment he needs to receive a return greater than the risk-free rate in order to compensate him. The more risky the investment the greater the compensation required.