High Risk, High Returns? Not Quite.

If anything, it's just the opposite.

Another risk-reward calculus.

Photographer: Brent Lewin/Bloomberg

For many years, investors have been told that risk and return are correlated. In a broad sense, history seems to bear that out -- the stock market, which fluctuates a lot more than the bond market, has yielded higher long-term returns. In a narrow sense, this principle -- the risk-return tradeoff -- is the basis of almost all academic theories of the value of financial assets. It makes sense, after all -- if something is risky, people generally won't buy it unless it also offers chances for big winnings. 

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