Revisiting the Basics of Return and Risk in Equilibrium

James Ohlson

Working Papers from Columbia - Graduate School of Business

Abstract: Consider the following two well-diversified portfolios: the first consists of 100 preferred stocks and the second of 100 regular equity stocks. Which of the two portfolios is riskier? Common sense would seem to suggest that the equity portfolio is more risky. in terms of traditional concepts it may well be that the equity portfolio has a larger "beta", but the major reason for the suggested answer rests arguably more on the idea that the distributional spread of the equity portfolio exceeds the one of preferred stocks.

Keywords: RISK; FINANCIAL ASSETS (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1997
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