The Variance Risk Premium: What Premium?

The Challenges of Realizing Theoretical Returns

INTRODUCTION

Investing is akin to fighting in a never-ending war. There are long periods of peace and prosperity, but investors are frequently drawn into short-term combat, extended battles, and multi-year wars. And the cycle repeats over and over.

For some of the foot soldiers, the COVID-19 crisis in 2020 represented the first time in the trenches while many of their captains are still scarred by the global financial crisis of 2008. Experienced majors painfully recall the tech bubble implosion in 2000 and a few select generals lived through the sudden stock market crash in 1987 at the start of their careers.