Risk Measurement

David E. Bell has completed research on the measurement of financial risk. The concepts of risk and return are widely used, at least informally, in the appraisal of financial opportunities. Return is typically measured by the expected value of a project, risk by the standard deviation of its returns. In general, these measures are not compatible with economists' view that decisions should maximize expected utility. Bell has identified a new measure of risk, or spread, that is compatible with both theory and intuitive perceptions of risk.