Price is not value, pricing is not valuation, and pricing models are not valuation models.

A valuation model is an effective method for estimating economic value.


Another term that is used to refer to economic value is "fundamental value", which derives the quantity of value from so-called fundamental economic metrics generated by a firm at the firm-level, in contrast to pricing metrics generated by a securities market at the security-level. 


Price is not value, pricing is not valuation, and pricing models are not valuation models. 


The conventional academic capital asset pricing model has one factor, the beta coefficient. 

• Models that include beta are pricing models, not valuation models. 
• This is not merely a matter of semantics. 

The difference between price and value, referred to as the margin of safety, is the raison d'etre of investment valuation independent of market pricing.


http://www.numeraire.com/value.htm

Risk is dependent on both the nature of investments and on their market price

The risk of an investment is described by both the probability and the potential amount of loss.

The risk of an investment - the probability of an adverse outcome - is partly inherent in its very nature.

• A dollar spent on biotechnology is a riskier investment than a dollar used to purchase utility equipment.  
• The former has both a greater probability of loss and a greater percentage of the investment at stake.

In the financial markets, however, the connection between a marketable security and the underlying business is not as clearcut.

• For investors in a marketable security the gain and loss associated with the various outcomes is not totally inherent in the underlying business; 
• it also depends on the price paid, which is established by the marketplace.

Greater risk does not guarantee greater return, risk erodes return by causing losses.

Greater risk does not guarantee greater return.

To the contrary, risk erodes return by causing losses.

It is only when investors shun high-risk investments, thereby depressing their prices, that an incremental return can be earned which more than fully compensates for the risk incurred.

By itself risk does not create incremental return, only price can accomplish that.