We recently had the pleasure of speaking with blogger and author Eric Falkenstein on StockTwits TV.  In a post over a year ago we had introduced readers to his ‘big idea’ and it is always helpful to hear directly from the author.  Eric’s research is at odds with much of what you read in the standard finance literature and in that respect it is controversial.  His work about the existence (or not) of the equity risk premium and the nature of the risk-return trade-off have implications for any one involved in managing money.  In our discussion we talked about how a ‘low volatility’ approach to equity investing can lead to a better risk-return proposition for investors.  We have included below links to the posts mentioned and further links to Eric’s research.  You can view the video in its entirety below:

Posts mentioned in the above video:

Risk and no return, an introduction to Eric’s work.  (Abnormal Returns)

Why Are High Risk Stocks So Crappy?  (Falkenblog)

Low Volatility Conference.  (Falkenblog)

Beta 1.0:  A New Low Cost Indexing Strategy.  (Falkenblog)

Two sets of low volatility and low beta ETFs are slated to come to market.  (IndexUniverse, ibid)

Data on implementing a ‘low volatility’ strategy.  (Beta Arbitrage)

“Risk and Return in General: Theory and Evidence” by Eric Falkenstein.  (SSRN)

Finding Alpha: The Search for Alpha When Risk and Return Break Down by Eric Falkenstein.  (Amazon)

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