There is no single definition of risk in the capital markets, but the most common measure is volatility. Stocks are more volatile than bonds, and bonds more volatile than cash. The close relationship between risk and price swings makes sense. High volatility increases the odds that you'll suffer a loss if you need to sell an asset to raise money, and the returns to volatile assets are uncertain. What's more, economists take a deeper look at stock market risk by breaking it down into two basic components, called idiosyncratic risk and structural risk.
Idiosyncratic risk resides with the company and customers.
Let's say an auto maker builds a brand-new line of cars. If the new models catch on with consumers, stockholders will benefit from a lush future earnings stream. If consumers reject the cars, the multibillion-dollar investment won't pay off, and investors will flee in disgust. Idiosyncratic risk is the chance that a pharmaceutical company won't get FDA approval for a new drug, or that a studio's movie will be a bust. You can essentially eliminate idiosyncratic risk by owning a broadly diversified portfolio.