What The Investment Industry Gets Wrong About Risk
Risk
By Dan Erdle
Overview
The modern way to approach risk, and the one used by the financial industry, is to define risk as volatility. If something moves up or down a lot, that means it is risky. The financial world has even come up with a mathematical way to measure risk called beta. If you take a finance class or hang around hedge fund professionals, you will learn all about mathematical formulas involving beta and how beta (volatility) determines how risky a financial asset is.
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