Skip to main content
This Board Has Moved

This board has been migrated to our new platform! Check out the new home page at discussion.fool.com or click below to go directly to the new Board on the new site.

Go to the New Site
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
galagan, the opposite can also be true - as the past three years show, you may not always be compensated enough for a risk. i tend to think that in general, efficiency pushes things towards risk-neutrality, but the premium you can earn oscillates back and forth over time, from negative to positive, around the risk-neutral proposition. although i am open to the potential for a persistent premium to be earned (what you called compensation) due to risk aversity, i just don't think that the premium or excess compenstaion is ever likely to be consistently available. for example, the risk-reward asymmetry in debt was the thing that "early milken" figured out. it was milken that figured out that lower rated debt had more than compensated for credit risk in the past. but that led to too much underwriting and a speculative orgy that actually pushed the premium into negative territory. as we saw again in the ipo market the past 7 years, the latecomers always pay too high a price.

tr
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.