# 2.3 (6 points) Consider the following statement: "over the long-run, risk and return within equity markets...

###### Question:

2.3 (6 points) Consider the following statement: "over the long-run, risk and return within equity markets are not related. Selecting stocks with a higher risk (i.e. higher standard deviation of the return), does not necessarily guarantee a higher return. This fact contradicts investment theory, which states that higher risk should give a higher expected return.” Critically evaluate this statement in light of the lessons we learn from the CAPM.

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