Marks argues that if risky investments guaranteed higher returns, they would not be risky by definition.
“if riskier investments could be counted on to produce higher returns, then by definition, they're not risky. So that can't be right.”
Marks clarifies that risky assets must appear to offer higher returns to attract investors, not guarantee them.
“assets that are expected to be riskier have to appear to offer a higher return or nobody will make those investments. That makes a 100% sense, doesn't it?”
Marks clarifies that risky assets must appear to offer higher returns, not that they deliver them.
“assets that are expected to be riskier have to appear to offer a higher return or nobody will make those investments. That makes a 100% sense, doesn't it? So that's what this relationship means”