Why Volatility does not Equal Risk

Share with friends
-->

-->

-->


by Warren Buffett

Volatility does not measure risk. Past volatility is not a measure of risk. It's nice math, but it's wrong. If a farm in Nebraska used to sell for $2,000 per acre, and now it sells for $600 per acre, investment theory would say that the beta of farms has gone up, and that they are more risky than before. If you tell that to people, they'll say that that's crazy. But farms don't trade daily the way stocks do. Since stock prices jiggle around, finance professors have translated that into these investment theories. It can be risky to be in some businesses. Risk is not knowing what you're doing. If you know who you're dealing with, and know the price you should pay, then you're not dealing with a lot of risk.

B2B EGypt

We provide you with a group of services that guarantee best added value to your corporate,website,company classification,system.Through proffessional experienced team members.

© 2009 Articles. All rights resevered. Designed by B2B Egypt