Understanding risk and return: an overview

Greg Filbeck and Hunter Holzhauer

Chapter 1 in Understanding Investment Risk and Return, 2025, pp 2-12 from Edward Elgar Publishing

Abstract: Investment risk and return are fundamental concepts that underpin financial decision-making and portfolio management. This book offers insights into how investors can measure and manage both concepts to achieve their financial goals, such as controlling inflation and maximizing risk-adjusted performance. The book integrates theoretical frameworks for portfolio optimization, including the efficient frontier, the capital asset pricing model, and more advanced factor models that explain asset returns and risk exposures. The book explores how these models are evolving with the integration of less traditional assets like derivatives and digital assets, as well as technological advancements like AI and machine learning. Readers will also gain insights into the biases of irrational investors and how value is assessed in past performance and future projections. The book is designed to provide readers with a nuanced understanding of the intricate relationship between risk and return and empower investors to make informed financial decisions.

Keywords: Inflation; Risk-adjusted performance; Derivatives; Digital assets; Machine learning; Irrational investors (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035339716
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