Analysis of stock market securities

Abstract

The principal objective of investment is to maximise returns while minimising risk. However, we have already noted that investments giving high returns will tend to incur high risk, whilst low risk investments will tend to give relatively low returns. Thus the investor must compromise. Investors with a high level of ‘risk aversion’ will seek low risk investments and will be forced to accept a relatively low return, whereas those with less aversion to risk will tend to seek the higher returns available from higher risk investments.