CHAPTER 20Some Rules of the Road for Risk Management: Axiom 4
Investing is taking risk in exchange for return. So understanding risk is a big part of the matter. This chapter delves into the concept of risk itself. Some risk can be thought of as a precise mathematical construction, as a residual that remains unexplained by a model, and as what is left unexplained when our best effort at representation fails. Not to get too Yoda on you, all of these aspects of risk lurk in the background of any investment.
AXIOM 4
To understand what is cheap and what is rich, you must understand risk. Risk premium is where the money is. After a meltdown, you really get compensated for the risk.
Corollary 4.0.1: When Assets Are Rich, You Are Not Rewarded as Much ...
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