The Missing Risk Premium: Why Low Volatility Investing Works - Softcover

Falkenstein, Eric G.

Softcover

ISBN 10: 1470110970 ISBN 13: 9781470110970

Publisher: CreateSpace Independent Publishing Platform, 2012

Synopsis

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. 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.

About this title

Review

"In this contrarian view of the asset pricing model, Falkenstein attempts to debunk the notion that greater risk equals greater reward...The author's conclusion is likely to be controversial in some circles, if not downright inflammatory" - Kirkus

Edition details

• Publisher: CreateSpace Independent Publishing Platform
• Publication date: 2012
• Language: English
• ISBN 10: 1470110970
• ISBN 13: 9781470110970
• Binding: Paperback
• Edition number: 1
• Number of pages: 196