Heterodox
The idea of risk is a rather confusing and nebulous concept in modern finance. The traditional textbook definition of “risk” is standard deviation or volatility. This is convenient for academic purposes because it allows us to quantify risk in a portfolio. But this is a flawed concept for several reasons: Volatility isn’t always a bad thing. In fact, volatility with a positive skew is a good thing. No one complains about a portfolio allocation that rises 20% per year and falls 5% every once...
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