Is There Such a Thing as a "Risk Premium"?

One author says no, there isn’t. And so you should stop betting on all those long shots:

I think the example of horse racing probably explains this best. Researchers have found that betting on the long-shot has had the worst payoff. My guess is that in any given race, the long-shot will draw interest from bettors who simply want to bet on the long-shot, no matter how good the horse really is. Betting and winning on the favorite may offer a higher payout (losing money somewhat slower), but it’s not as much fun at hitting the rare long shot. This is what probably what draws many investors to obviously overpriced risky stocks. They simply want to be in the game, and they’re willing to ignore the numbers. The lottery is the same way.

I don’t know about the risk premium, but this seems like good investment advise in any case. Get-rich-quick types tend to get poor much quicker. Slow, boring compound interest is still one of life’s greatest miracles.

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