Investment Risk and Return Concepts

The expected loss in the worst x% of outcomes.

The variance of the losses only.

A measure of the possibility of losing money.

A measure of the dispersion of a set of data points around their mean.

The square root of variance, representing the typical deviation from the mean.

The anticipated return of a specific investment, often a stock.

A measure of risk that considers both upside and downside potential.

The study of how investors make decisions when faced with uncertain outcomes.

A table or graph that shows the probability of each possible return for an investment.

A measure of how much an investment's return is expected to vary from its expected return.

The potential for an investment to generate gains or losses.

An investment with a higher expected return typically carries a higher level of risk.

A comprehensive measure of risk that accounts for both the probability and magnitude of losses.

A measure of how spread out a distribution of returns is. It's calculated by averaging the squared deviations of each return from the expected return.

The square root of the variance, expressed in the same units as the returns. It provides a more intuitive measure of variability.

A return that never deviates from its expected value, resulting in a variance of zero.

The formula to calculate the variance of a return is Var(R) = E[(R - E[R])^2], which means averaging the squared differences between each return (R) and the expected return (E[R]).

Calculating the standard deviation involves taking the square root of the variance.

The higher the variance and standard deviation, the greater the risk associated with an investment.