Gustavo Ballvé on July 22nd, 2011
Food for thought, Home, Investment Themes, Mental models, Portfolio Management, Signal or Noise

Just the title of this video in the Financial Times (read it here) is enough of a brain-teaser. Things are not as defined as it makes it sound, but the point is: if you rely excessively in a “risk-free” rate, your models must be going crazy. As the “professor” (actually an FT editor) in the video says, efficient market theory was always shaky ground in which to lay the foundations of any investment, and now it should be clear to everyone that we should question the very existence of something “risk-free”. In fact, there was always this choice.

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