incipal invested. The relationship between risk and return in investment analysis is such that, in almost all situations, the anticipated or demanded return rises as the investment risk rises. Conversely, a low or no-risk investment is accompanied by a low anticipated or demanded return on that particular investment.
A number of procedures and tools are available to measure the risk and return relationship of an investment vehicle. Important among these procedures and tools is the Capital Asset Pricing Model (CAPM). The capital asset pricing model holds that, in efficient capital markets the expected risk premium on each investment is proportional to that instrument's beta. In essence, the beta coefficient is a measure of the volatility of an investment vehicle's performance in relation to some measure of overall performance. A typical beta refe
...