“Beta is a more or less useful measure of past price fluctuations of common stocks. What bothers me is that authorities now equate the beta idea with the concept of risk. Price variability yes; risk no. Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earnings power through economic changes or deterioration in management.” —Benjamin Graham
Benjamin Graham and Risk by Bruce Grantier
In this article Bruce Grantier reviews the modern portfolio theory (“MPT”) concept of risk and that of Benjamin Graham and other value investors. Grantier includes a discussion of human behavioural biases and conclude with some comments on the differences in the two definitions of risk.
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned.