The risk-return trade-off that investors face on a day-to-day basis is based on realized rates of return because expected returns involve too much uncertainty.

Question

Quizplus · Accepted Answer

The risk-return trade-off is based on expected rates of return, not realized rates, because investment decisions are made based on expectations of future performance, despite the inherent uncertainty.

The Risk-Return Trade-Off That Investors Face on a Day-To-Day Basis