It is impossible to appreciate how the financial system works without understanding risk stephen cecchetti risk is not an add on it permeates the whole body of thought. 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 have negative returns in equilibrium. He gathered his thoughts on the non existent risk premium in finance which means that modern portfolio theory is wrong and on low volatility investing into a short book the missing risk premium why low volatility investing works modern portfolio theory mpt is the idea that the expected return of a financial asset is a function of its risk. Its called the missing risk premium why low volatility investing worksits available at amazon for 1495 a kindle version is going to be ready in about 2 weeks that will be a little cheaper it would be a great complement to a corporate finance course and should be of interest to anyone interested in the truth on something very fundamental what do people maximize. Eric falkenstein author of the missing risk premium why low volatility investing works usa explaining a financial theory to a broad audience is no easy task and refuting one of the oldest and best known investment theories higher risk for higher returns harder still
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