Doug Henwood wrote:
>
> What I never understood was why the market plays along with the risk
> premium. Why, if stocks are more volatile than bonds, should they
> return more? What is the mechanism by which the market conforms to
> finance theory? Are investors like little kids who say "I won't buy
> stocks unless they go up!" Or is it just that everyone believes this
> to be so, so they just buy stocks out of habit, and they conform to
> theory by going up?
It's not necessarily the case that they return more, except to insiders. I think the statistics of who wins and who loses at stocks are not all that impressive. A friend told me once that 90% of those who invest in stocks lose money, but I find it hard to believe it's that bad.
Joanna