Want better returns? Forget risk. Focus on fear
In effect they acknowledge that going down the Capital Asset Pricing Model rabbit hole with Alice did not get them to Wonderland. Their solution is to go further down the same rabbit hole.
risk
Random Walk fallacy in investing
The defining feature of randomness of a series of data is that each data event be independent from all other data events in the series.
Volatility and risk – How the investment industry got it wrong
The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period.
A coward’s primer for investors per Paul Samuelson
Kahneman is telling us that an ordinary person might, without being thought silly or irrational or cowardly, reject the single bet but decide to take on the 100-bet game.
Strategic thinking, plans and a punch in the mouth
And here’s the difference between the bursting of true stock market bubbles and other stock market routs. When the Dot Com bubble burst it took many many, years for the fallen to recover.
Moats, ROIC and the problematic Cost of Equity
If the CAPM is flawed, what can replace it? The best approach would be to assess whether companies in general and relatively speaking, the company in question, can raise money cheaply in public offerings.
The price of risk in equity markets
Mr. Market demands a very high expected return before he will invest in stocks. Whereas Mr. Bond suffers money illusion.
A Daniel Kahneman core achievement applied to investing
Consistent overweighting of improbable outcomes – a feature of intuitive decision making – eventually leads to inferior outcomes.
Sentiment and the four faces of risk
Ironically, the four faces of risk reverse actual risk. Risk is perceived to be highest in bear markets; moderate in sideways markets; increasingly lower in bull markets; and, more or less ignored, in bubbles.
What investors can learn from professional gamblers
Now, real games are not like that at all. Real life is not like that. Real life consists of bluffing, of little tactics of deception, of asking yourself what is the other man going to think I mean to do. And that is what games are about in my theory.
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