Tail risk premiums versus pure alpha

Tail-risk skewness, rather than volatility, is correlated with risk premiums

chart showing underlying performance of the asset

CLICK HERE TO VIEW THE ARTICLE IN FULL

One of the pillars of modern finance theory is the concept of risk premium, ie, that more risky investments should, in the long run, also be more profitable. If this was not the case, investors would divest, prices would fall and expected returns would rise until they become attractive again. Cogent as it may sound, this conclusion appears to be in contradiction with direct empirical observations. For example, several authors have reported an inverted

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

If you already have an account, please sign in here.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here