The Fallacy of the Efficient Market Hypothesis The First Step in Choosing from Thousands of Stocks

The False Correlation between Risk and Reward

Traditionally people assume that risk and reward are positively correlated, because investors presumably require higher expected returns in order to be willing to assume additional risk. But for value investors, risk and reward are negatively correlated. The greater the extent to which perceived value exceeds market price, the higher the potential reward and the lower the risk.