Read the following chapter, The Most Important Thing – Understanding Risk from the book, The Most Important Thing by Howard Marks. You should be able to download the chapter from the course D2L site.

I am interested to know your thoughts on investment risk from the perspective of common stock investment. To be more precise, when you invest in a common stock, what worries the investors – deteriorating of business fundamentals or volatility of the stock price. Now one can argue that the fundamentals are being reflected or should be reflected in the stock price. If you believe in market inefficiency and irrational behaviour of investors, you will know that market doesn’t always incorporate business fundamentals instantly as hypothesized by the market efficiency theory.

Your grade solely depend on your understanding of the concept. Certainly I don’t want you to reproduce our work. Apart from reading this chapter, you may want to consider the class discussions on risk and return.

Page limit: ONE page

Submit using the appropriate dropbox folder. I will not entertain any late or e-mail submission.