I think that there is an optimal appetite for risk. Probably higher than what results in repeated reality checks, but lower than what results in exuberance bubb

I think that there is an optimal appetite for risk. Probably higher than what results in repeated reality checks, but lower than what results in exuberance bubbles. We do tend to calibrate our risk appetites depending on events [1], but there is a baseline around which this level fluctuates. It is a separately interesting issue if overconfidence is merely a scaling factor in the current scenario when it wasn't risk being underestimated in the model, but the model itself being utterly flawed. [1] http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303 http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303