Return and risk are the key determinants of share price, which represents the wealth of the owners in the firm.

Question

Quizplus · Accepted Answer

Return and risk are key factors that affect the value of a stock, which in turn determines the wealth of shareholders. The higher the expected return and lower the perceived risk, the higher the share price is likely to be. Conversely, if the expected return is low and the risk is high, the share price may decline. Therefore, return and risk are important drivers of investor behavior and stock market performance.

Return and Risk Are the Key Determinants of Share Price