Per BKM, Market price of risk and "reward-to-risk" ratio are interchangable terms. (p. 296).
So, the question I have is, in Goldfarb's manual, p. 97, he refers to the Market reward-to-risk ratio as = E(R_M)/sigma_M
However, BKM's footnote 7 on p. 296 clearly states that Goldfarb's version is sometimes referred to as the market price of risk, but it is not. The unit of risk is variance and the price relates the risk premium to variance...not standard deviation.
Can someone explain to me this discrepancy between the text and Goldfarb? Am I not understanding something correctly? Also, is it even possible to get in touch with Goldfarb directly??...I figured I could just ask him, and as you can see, I failed...
So, the question I have is, in Goldfarb's manual, p. 97, he refers to the Market reward-to-risk ratio as = E(R_M)/sigma_M
However, BKM's footnote 7 on p. 296 clearly states that Goldfarb's version is sometimes referred to as the market price of risk, but it is not. The unit of risk is variance and the price relates the risk premium to variance...not standard deviation.
Can someone explain to me this discrepancy between the text and Goldfarb? Am I not understanding something correctly? Also, is it even possible to get in touch with Goldfarb directly??...I figured I could just ask him, and as you can see, I failed...
Goldfarb Market Reward-to-Risk Ratio
0 commentaires:
Enregistrer un commentaire