Risk and return. The drumbeat that return is received in exchange for taking on risk as measured by volatility is relentlessly driven into the minds of all investors, but what if this trade-off is not as strong as the rhetoric? New research focuses on skew as one of the key risks. In particular the downside risk of negative skew may be more important at explaining excess returns than volatility which can lead to either upside or downside.

Risk and Return2