![]() The first-“Risk Neglect in Equity Markets” by Malcolm Baker of the Harvard Business School-looks at an obvious flaw in the CAPM. ![]() Two papers in the spring Journal of Portfolio Management bring these issues to light. Risk and reward may not be as securely linked as they used to be. The techniques they have adopted may have changed the nature of the market. In turn, investors have applied their insights to the market. Academics have been examining these issues for decades, and have come up with such insights as the capital asset pricing model (CAPM) and the efficient market hypothesis. ![]() Safe assets pay low returns if you want higher returns, you have to risk your capital. RISK is linked to reward it is virtually the first lesson one learns about finance.
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