The Missing Risk Premium: Why Low Volatility Investing Works Eric G. Falkenstein

ISBN:

Published: September 9th 2012

Kindle Edition

196 pages


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The Missing Risk Premium: Why Low Volatility Investing Works  by  Eric G. Falkenstein

The Missing Risk Premium: Why Low Volatility Investing Works by Eric G. Falkenstein
September 9th 2012 | Kindle Edition | PDF, EPUB, FB2, DjVu, audiobook, mp3, ZIP | 196 pages | ISBN: | 10.12 Mb

Risk is the deviation from the consensus rather than an exposure to a covariance, and this implies there is no risk premium in general. It also implies that when there are a large number of people buying highly volatile assets, such assets will haveMoreRisk is the deviation from the consensus rather than an exposure to a covariance, and this implies there is no risk premium in general.

It also implies that when there are a large number of people buying highly volatile assets, such assets will have negative returns in equilibrium. As there are several independent motivations for people to buy highly volatile assets, intuitively risky assets generally have lower-than-average returns. This novel conception of risk implies many things more consistent with the data than the current theory.Risk taking is an important life skill, so understanding its nature is important, and unfortunately academics who study it full-time are like so many other experts: when not irrelevant, 180 degrees wrong.This book explains the current asset pricing theory, and proposes an alternative, using theory and a unique survey of the data across many asset classes.

Familiarity with some MBA level finance is helpful but not necessary to appreciate this book.



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