By Anthony Summers We’ve all heard it before: Higher risks demand higher rewards.
Most investors take this statement as gospel. But it was only until the 1950s that the idea became popular, when economist Harry Markowitz laid the foundation for Modern Portfolio Theory.
The theory describes the proper relationship between risk and reward in portfolio construction.
Today’s chart shows that theory at work in the real world.
To do this, we’re taking another look at the corporate bond market – again comparing default rates per bond credit rating to their effective yields.
Last week, I broke down the corporate bond market to reveal how increasing levels of default …read more