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>you can't just dogmatically say it's equivalent to cap-weighted plus leverage I'm saying it's strictly better to do cap-weighted plus leverage. That's what fi
by pedrocr 9y ago
>you can't just dogmatically say it's equivalent to cap-weighted plus leverage
I'm saying it's strictly better to do cap-weighted plus leverage. That's what financial theory tells us anyway, that the best portfolio is whatever mix between risk free cash and the same mix as all the assets in the world. Deviating from that brings you farther away from the efficiency frontier. Now for this to hold EMH must hold and we know it's not true in the stronger forms which was why I was asking for a risk adjusted benchmark.
- perl4ever 9y agoI don't think there's a theory that tells you risk is volatility. Isn't that more of an axiom? And I have the distinct impression it was chosen because it leads to tractable math. I'm not endorsing a specific alternative definition of risk, but I was suggesting risk is clearly multidimensional and intimately related to predicting what will be correlated in the future.