What financial concept refers to the trade-off between risk and expected return of investments?

The financial concept that refers to the trade-off between risk and expected return of investments is indeed the risk-return trade-off. This principle highlights that as the potential return of an investment increases, so does its risk. Investors generally seek to maximize returns but must accept that higher returns are associated with a greater degree of uncertainty and potential loss.

This relationship is fundamental in investment theory and helps guide investors in portfolio construction and asset allocation strategies. By understanding the risk-return trade-off, investors can make informed decisions that align with their risk tolerance and investment objectives. For instance, a conservative investor might choose lower-risk bonds that provide stable, though modest, returns, whereas an aggressive investor might opt for volatile stocks in search of higher returns.

While the other concepts mentioned—market analysis, valuation principle, and investment horizon—are important in the realm of corporate finance and investment strategy, they do not directly address the inherent relationship between risk and expected returns as clearly as the risk-return trade-off does.