A Random Walk Down Wall Street

But before we even think of using these rules, we must bear in mind three important caveats.

We like to see our best plants grow, but, as summer wears on, the weeds often get the best of us.

Diversification reduces risk but cannot eliminate systematic risk.

Beta is the numerical description of systematic risk.

Not all of the risk of individual securities is relevant in determining the premium for bearing risk.

The capital-asset pricing model says that only systematic risk will command a risk premium.

Arbitrage Pricing Theory (APT) captures a number of important systematic elements of risk.

Behavioral finance is not a branch of standard finance: it is its replacement with a better model of humanity.

Psychologists will have none of this economic claptrap.

The market can remain irrational longer than the arbitrageur can remain solvent.