Question: Consider the following statement: Over the long-run, risk and return within equity markets are not related. Selecting stocks with a higher risk (i.e. higher standard

Consider the following statement: "Over the long-run, risk and return within equity markets are not related. Selecting stocks with a higher risk (i.e. higher standard deviation of the return), does not necessarily guarantee a higher return. This fact contradicts investment theory, which states that higher risk should give a higher expected return." Do you agree with this statement? Critically evaluate it in light of the lessons we learn from the CAPM.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!