Download This PaperHow Do Investors Measure Risk?
9 Pages Posted: 3 Oct 2015
Date Written: October 1, 2015
Abstract
We infer which risk model investors use by looking at their capital allocation decisions. We find that investors adjust for risk using the beta of the Capital Asset Pricing Model (CAPM). Extensions to the CAPM perform poorly, implying that they do not help explain how investors measure risk.
Suggested Citation: Suggested Citation
Berk, Jonathan B. and van Binsbergen, Jules H., How Do Investors Measure Risk? (October 1, 2015). Available at SSRN: https://ssrn.com/abstract=2668303 or http://dx.doi.org/10.2139/ssrn.2668303
Jules H. Van Binsbergen (Contact Author)
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
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