Magnifying the Trivial
continues to be bearish or, at the least, hes not convinced there is any compelling reason to have risk in is holdings.
: "Think of it this way. Suppose that there was a high 80% chance that the market will rise 10% over the coming year, and just a small 20% chance that it will decline 15% over the coming year. Sound like good odds? Well, given those odds, the expected return would be [.80(10%) + .20(-15%) = ] 5%, which is the same as you'd get in risk-free T-bills. A risk-averse investor wouldn't take the bet. " Funds - Weekly Market Comment: September 10, 2006 - Magnifying the Trivial