The Concept of Risk

May 8, 2011

My hunch is that investors generally look at market analysis a lot more than they think about market philosophy. If this is true, then it is rather unfortunate; for how can one ascertain a ‘good’ or ‘bad’ analysis without a solid of understanding of what it takes for it to be ‘good’ or ‘bad’? A problematic symptom of this is a general confusion about ‘risk’. It is often said that ‘such and such is risky’ or ‘he took too much risk’ or even ‘this is less risky than that’. But what do these statements really mean? And if we can understand what they are supposed to mean, then are they even intelligible? In short, what is this concept of risk?

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