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the claim

Riskier investments pay higher average returns to compensate for risk.

the verdict
SUPPORTED
the evidence backs this
Recorded sources
5 sources for · 0 against

Counts group repeated records of the same source within each side. They do not measure evidence strength or source independence.

Is it true that Riskier investments pay higher average returns to compensate for risk?

Yes. Financial theory and empirical evidence strongly support the principle that riskier investments provide higher average returns to compensate investors for bearing additional risk.

Verdict: SUPPORTED · 5 sources for, 0 against · Last checked

The analysis

The retrieved literature consistently supports the foundational financial principle that riskier assets command higher expected returns. Multiple studies utilizing asset pricing frameworks like the CAPM, intertemporal models, and empirical market analyses confirm a positive relationship between risk (such as market beta or covariance) and return. There are no papers in the retrieved set refuting this core relationship.

Evidence for · 5
A Capital Asset Pricing Model with Time-Varying Covariances
1988
The paper confirms that expected returns are proportional to systematic risk, compensating risk-averse investors for bearing uncertainty.
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Bollerslev, T., Engle, R., & Wooldridge, J. (1988). A Capital Asset Pricing Model with Time-Varying Covariances. doi.org. https://doi.org/10.1086/261527

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More for · 4
Transition versus physical climate risk pricing in European financial markets: a text-based approach
2024
The study documents that investors demand compensation for exposure to physical and transition climate risks, linking risk to returns.
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Bua, G., Kapp, D., Ramella, F., & Rognone, L. (2024). Transition versus physical climate risk pricing in European financial markets: a text-based approach. doi.org. https://doi.org/10.1080/1351847X.2024.2355103

The intertemporal risk-return relationship: Evidence from international markets
2015
The research finds positive evidence supporting the tradeoff between excess returns and covariance risk across international markets.
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Chiang, T., Li, H., & Zheng, D. (2015). The intertemporal risk-return relationship: Evidence from international markets. doi.org. https://doi.org/10.1016/J.INTFIN.2015.06.003

A review of the theory of and evidence on the use of the capital asset pricing model to estimate expected share returns
2002
The review concludes that the Capital Asset Pricing Model describes and explains the fundamental risk-return relationship.
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Laubscher, E. (2002). A review of the theory of and evidence on the use of the capital asset pricing model to estimate expected share returns. doi.org. https://doi.org/10.1108/10222529200200007

Analisis Metode CAPM (Capital Asset Pricing Model) Dalam Menentukan Investasi Saham (Pada Perusahaan Sub Sektor Asuransi Umum Di Bursa Efek Indonesia)
2025
The analysis of insurance stocks indicates that riskier assets with higher betas provide higher potential returns.
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Shaflly, M., Dahlan, J. K., Cirendeu, K., & Tim, C. (2025). Analisis Metode CAPM (Capital Asset Pricing Model) Dalam Menentukan Investasi Saham (Pada Perusahaan Sub Sektor Asuransi Umum Di Bursa Efek Indonesia). doi.org. https://doi.org/10.51903/jupea.v5i2.4870

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What does the evidence say?

The retrieved literature consistently supports the foundational financial principle that riskier assets command higher expected returns. Multiple studies utilizing asset pricing frameworks like the CAPM, intertemporal models, and empirical market analyses confirm a positive relationship between risk (such as market beta or covariance) and return. There are no papers in the retrieved set refuting this core relationship.

Receipt History
first checked04 Aug 2026
judged → SUPPORTED · 9704 Aug 2026
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