Couple Other Good Thoughts From Falkenstein

Followup on the book review,

• Why equities could have a return premium, but a very modest one: "cross-sectional equity returns over a hundred years are not positively related to economic growth, so it is not as if the economy is a representative firm and a risk averse individual is choosing how much wealth to allocate to a stochastic investment; rather, the stock market is a subtle game between insiders and outsiders where the insiders merely provide enough top-line returns to keep the rabble unaware they are being had."
• "Stocks with higher volatility generate more news than less volatile firms. Such stocks are then in play and so become relevant to the investor interested in deviating from the index. Stocks that are in the news generate lots of information that fiduciaries can use to sell their ideas to clients. Such cocktail party stories are very helpful, and it is much easier to talk about something in the news..."

A stock like Conrad reports once a quarter and is otherwise never in the news. Think about how often Chesapeake Energy has been in the news.