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Opinion
John Authers

Fortune No Longer Favors the Bold In Markets

The theory that higher risk leads to higher returns is false. Plus, Italian bond yields join the rest of Europe in pumbing new depths.

When it comes to the stock market highly volatile stocks don’t lead to the biggest returns.

When it comes to the stock market highly volatile stocks don’t lead to the biggest returns.

Photographer: Daniel Berehulak/Getty Images Europe

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The most basic building block of modern academic finance is arguably that higher returns are a reward for taking greater risk. That is why stocks in the long run generate greater returns than less riskier investments such as corporate bonds, and why small entrepreneurial companies that strike it big deliver far more for shareholders than regulated utilities.